In some respects, Commercial Vehicle Group (NASDAQ:CVGI)
is seeing results from its protracted turnaround attempts - the
company's gross margins have improved, there is a credible plan in place
to reduce operating costs further, and management seems to be well
aware of the need to carefully manage its manufacturing footprint to
preserve margins. On the other hand, 2016 is likely to be a horrible
year for Class 8 truck orders (and particularly the linehaul trucks that
offer the most content and best margins), and the company's
long-standing efforts to diversify into off-highway markets still
haven't borne much fruit.
Although I think Commercial Vehicle's shares remain undervalued on the basis of the cash flows that the company can generate, I don't know how anyone could have a lot of confidence regarding the likelihood that it will
generate those cash flows - and a significant industry down-cycle is
not often the time to take big swings on risky ideas. So while I do
suggest that investors looking for risky deep-value turnarounds
could/should dig into this story, and I will continue to hold on to my
tiny position, this is most definitely an example of trying to generate
alpha the hard way (something that, in keeping with my sloth-like
torpor, I generally avoid).
Continue here:
Declining Markets Add New Challenges For Commercial Vehicle's Turnaround
No comments:
Post a Comment