It has been a while since I've thought Multi-Color (NASDAQ:LABL)
shares were truly undervalued, but I've been reluctant to sell out of a
story with good underlying momentum and significant long-term share
growth and margin leverage potential. Even with the 5% drop on Friday in
response to fiscal fourth quarter earnings, the shares are up about 10%
over the last six months and more than 70% over the last year - not a
bad return on patience.
I continue to expect Multi-Color to
modestly outgrow the industry on an organic basis and supplement that
internal sales growth with additional M&A. The label industry
remains extremely fragmented and while it does not require tremendous
capital investment for long-term competition, I nevertheless believe
that scale still matters and favors players like Multi-Color and CCL Industries (OTC:CCDBF).
Two of the biggest opportunities for Multi-Color remain in improving
operating margin and asset utilization, as both could unlock greater
free cash flow production. As is, the shares look fairly valued to
slightly undervalued.
Read more here:
Multi-Color Stumbles A Bit, But Still Has Ample Room To Do Better
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