I liked small specialty chemical company KMG Chemicals (NYSE:KMG) back in August of 2014,
but little did I expect the company to shoot up 67% in less than a
year. I believe the gains can be tied back to management doing what it
said it was going to do - deploying capital to add a third business,
delivering better margins through restructuring, and upgrading the
overall business (by exiting the creosote operations).
I do have
some concerns that this somewhat illiquid and under-followed stock has
now overshot the mark. A mid-$20's fair value seems reasonable even when
factoring in additional M&A, but if KMG can identify acquisition
targets with margins and FCF potential along the lines of Val-Tex,
perhaps that target too could prove conservative.
Continue here for the full article:
KMG Chemicals Unlocking Its Potential
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