Seeking Alpha: Commercial Vehicle Still Improving, But Not As Cheap

With Commercial Vehicle Group (CVGI) shares up about 25% year-to-date and 18% since my last article, I can't really complain as a shareholder. In that time period, CVGI's performance has easily outdistanced better commercial vehicle components companies like Cummins (CMI), BorgWarner (BWA), Allison (ALSN), and Grammer (OTC:GMEGF). Some of this can be tied to the strong underlying growth in North American Class 8 orders, but I believe some of it is likely due to the recognition that Commercial Vehicle's new management team has a new, better vision for how to operate this company.

The question with a turnaround is when to take your winnings and move on. I have to admit that I'm close to that point with Commercial Vehicle. I do believe that the company has the potential to gain share outside of its core North American truck market and even relatively small changes in operating margin, EBITDA margin, or FCF margin assumptions lead to meaningful changes in estimated fair value. The shares still look poised for low double-digit returns, but investors shouldn't forget that this is not an inherently high-margin business and they shouldn't overstay their welcome reaching for that next dollar.

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Commercial Vehicle Still Improving, But Not As Cheap