It's always encouraging to see stories develop in line with your
expectations, and I really have nothing to complain about when it comes
to Orchids Paper Products (NYSEMKT:TIS). The shares are up about 30% from April, when I wrote
that the company's strategy of "controlled aggression" toward
geographic expansion and its cost consciousness could serve investors
well as a GARP story.
The story here continues to center around
the growth potential of private label tissue products, the company's
geographic expansion, and management's prudent approach to costs.
Valuation is a more interesting topic to me though, as I think an
argument can be made that a FCF-based target in the high $30s is not
unreasonable. While that works back to a 10x multiple on 2016 EBITDA, a
high multiple for a paper company, it might not be so unreasonable
relative to the three-to-five year growth potential.
Read more here:
Orchids Paper Products Continues To Blossom
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