Sunday, May 15, 2016

Seeking Alpha: Declining Markets Add New Challenges For Commercial Vehicle's Turnaround

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

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