Kudos to Materion (NYSE:MTRN)
for creating a plan to emphasize value-added products, improve margins,
and generate more free cash flow and then executing, or at least
starting to execute, on it. The shares aren't much higher than when I last wrote about the stock,
but I thought the shares looked a little pricey then and there haven't
been too many outperformers in the specialty alloy space.
I do
still like this company, and I think the company's leverage to advanced
industrial components, auto electronics, consumer products, and so on
will serve it well. I also like the prospects for margin leverage and
improved asset efficiency leading to free cash flow that can be
reinvested into complementary acquisitions that will further stimulate
revenue growth and margin leverage.
All of that said, it's unusual
for a specialty alloys company to generate FCF margins above the
mid-single digits for any sustained length of time and I think my 7%
annualized organic revenue growth number is generous as is. I like the
prospects for Materion to do well against undemanding growth comps this
year and tomorrow's investor day could be a catalyst, but there's not
very much fundamental undervaluation here that I can see.
Read the full article here:
Materion Executing On A Multi-Armed Growth Strategy
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