Tuesday, February 18, 2014

Seeking Alpha: Multi-Color Fades A Bit In The Third Quarter

Sometimes a couple of steps forward is followed by a step or two back. The operating leverage and margin improvement story at Multi-Color (LABL) isn't a one quarter or one year process, so I am not going to overreact to one disappointing quarterly result. That said, the ongoing weakness in pricing does highlight a significant challenge for the industry and sometime to watch when rival CCL Industries (OTC:CCDBF) reports later this week.

I continue to like Multi-Color as a multi-year play on greater consolidation in the label industry, better gross margins and operating leverage, and industry shifts toward more advanced (and expensive) label options. Consolidation has to be tempered with balance sheet risk and operating leverage is not a straight line process, but Multi-Color's basic thesis has not changed all that much. I continue to believe that these shares are priced to provide a decent premium to market returns over the next few years.

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Multi-Color Fades A Bit In The Third Quarter

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