We noted new Seeking Alpha contributor Careful Investor's take on the Colombian architectural glass maker Tecnoglass (NYSE:TGLS), for which he rightfully got an editor award. His buy thesis can be summarized in the following points:
- The company is facing a growing market.
- The share price is temporarily depressed because of a share offering.
- The company provides a degree of safety through cheap valuation and a generous dividend.
We have a few remarks and our usual overview, but we generally agree with his thesis.
First the growth, this becomes immediately obvious when considering our usual figure:
In less than five years, revenue almost doubled although it has to be noted that operationally, there has been little to no progress. In fact, earnings seem to be trending slightly lower.
Q4 results
From the earnings deck:
There are a few drivers of growth:
- The US market in general
- Share win
- Increasing penetration into single-family houses
The US market is considerably more important for the company than its home market (the company also sells in Panama, but that's a fraction of US sales). Revenues from the US have more than doubled in three years and US-bound revenue consists 86% of backlog (which itself stands at 1.4x sales).
US growth is quite explosive. While total revenues are up 18%, those in the US are up by 24% (to $297M for the year) and excluding Florida sales grew 34%, reflecting the benefits of geographical expansion.
Management argues there is a capacity shortage in the US which has led to price increases, which the company simply follows. So it's both the volume and the price that are tailwinds. Management believes that it is sold out for the next two years.
We would add that also the overall construction market is given a boost by the
