North American Galvanizing & Coatings: Buy 'On the Dip'

| About: North American (NGA)

Earlier this year, in March to be more precise, a company called North American Galvanizing and Coatings (NGA) caught my eye.

NGA is a company that uses zinc for its galvanizing processes. As a result of the growing zinc prices, the company had booked impressive revenue growth as well as earnings growth. I added NGA to my list of stock picks at a price of $5.18 and closed that position at $12.06 in May. After that, the stock went up a bit further and then had a 3:2 reverse stock split before it fell down all the way to its current price of $5.75.

I can imagine this stock has been quite a pain for those that have held this stock all the way from its peak in May. But the fundamentals don't lie: NGA saw its sales double in two years and its EPS increase tenfold in two years. And the story continues as the first halfyear results showed net earnings that were 80% higher than last year at $0.36 per share. Fact is that NGA trades at a P/E of 10.7 with, I repeat 80% EPS growth over the first halfyear!

Technically, the stock shows a bearish picture. I would expect the RSI to bottom out anywhere around 40 in the weekchart in order for the stock to stay in its bull range. Keeping in mind the long term uptrend that zinc prices show, I will add NGA to my list of stock picks at a price of $5.75 with a $10.00 price target for mid 2008, based on the earnings growth reported in the first halfyear and the company's continued impressive growth.

Disclosure: The author had no position in NGA at the time of writing.

NGA 1-yr chart:


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