Label manufacturer Multi-Color (NASDAQ:LABL) has suffered from some self-inflicted wounds in recent quarters. The company's decision to exit a low-margin label business with SABMiller (OTCPK:SBMRY) has tamped down organic growth, while significant acquisition integration and compliance remediation issues have hit margins. With that, the shares saw two painful gap-downs in the past year, though the shares have largely recovered from the second one.
Looking ahead, I still don't see these shares as a remarkable bargain. My model assumes low single-digit organic growth, consistent M&A, and steady margin improvements, but even double-digit growth only gets me to the mid-$60s for fair value. Perhaps the company could do better, particularly if it can build up its higher-margin healthcare business, but I believe it's too soon to assume that.
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After Multiple Stumbles, Multi-Color May Be Back On Track