Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

An Under The Radar Pick In This Hot Industry

|Includes: ARII, CSX Corporation (CSX), UNP

Since early in the 19th century, railroads have been a symbol of expansion and economic growth. Americans were able to travel between major cities in a fraction of time compared to other conventional methods at the time. Railroads were a key military tool during the Civil War and certainly contributed to the rise of industrial America thereafter. Fast forward to 2013 and railroads may not have the same appeal as they did back then, but as far as commuter transportation, they are still a symbol of economic growth and even have growth potential. However, while you could buy directly into the major operators for exposure, such as CSX Corp. (NYSE: CSX) or Union Pacific Corporation (NYSE: UNP), there is a pick that is emerging growth and could post major gains over the next several years.

I am referring to American Railcar Industries, Inc. (NASDAQ: ARII). According to, the company, "designs, manufactures, and sells hopper and tank railcars in North America. Its manufacturing operations segment manufactures general service and specialty hopper railcars that are used to transport, load, and unload grains, cement, plastic pallets, and bulk products. It also transports heavy ore mineral loads and uses non-pressure and pressure tank railcars to handle various commodities including: petroleum products, ethanol, asphalt, vegetable oil, corn syrup, chlorine, anhydrous ammonia, liquid propane, and butane". The skinny is that American Railcar makes a variety of different kinds of railcars for major operators and governments.

Turning to the fundamentals, the company has a market cap of $909.17 million and is currently ranked a "hold" by analysts. Price to earnings is at 10.46, while forward price to earnings comes in at 10.03. Price earnings growth measures up at an undervalued .70, price to sales is at 1.19, price to book is at 2.19, and price to cash is at 7.91. The company has a total debt to equity of .47 and cash per share of 5.39, giving it a solid current ratio of 2.5. Earnings are expected to rise 28 percent this year, 9 percent next year, and 15 percent over the next five years. American Railcar pays a 2.35 percent annual dividend. Margins are quite decent with a gross margin of 23.2 percent, operating margin is at 19.4 percent, and profit margin of 11.4 percent.

Overall, the success of American Railcar depends on the continued recovery of the United States economy. As the economy grows, railroad majors will face increasing demand and will continue upgrading their fleet, at least in theory. To be sure, this is a long-term investment and is no means likely to turn major gains overnight. Another downside in the short-term for railroads is the falling price of oil. As oil becomes cheaper to ship, shippers will likely turn to oil based transportation. However, when oil rises, railroads see an uptick in business. In the end, I see American Railcar as a long-term winner.