When I last wrote about Universal Stainless & Alloy Products (NASDAQ:USAP), I thought this struggling specialty alloys company had some speculative appeal but only for aggressive risk-seeking investors. The shares have since risen about 30%, on par with fellow alloys company Carpenter (NYSE:CRS), better than Haynes (NASDAQ:HAYN) (up 15%), and worse than Allegheny Technologies (NYSE:ATI)
(up 56%). I believe these gains have been fueled by optimism that the
"perfect storm" of weakness in aerospace, power gen, oil/gas, and heavy
equipment has largely bottomed and that sales and margins should improve
from here.
I think USAP could be 10% to 20%
undervalued today, and that's assuming the company doesn't regain prior
peak sales until 2023 and prior peak gross margins until 2021 (the
difference being a mix shift toward higher-margin products). On the
other hand, I don't think the company is exactly out of the woods with
respect to its debt position and there is ample capacity in the
specialty alloy market. Add in wobbliness in aerospace order books and
persistent low energy prices, and this remains a stock that's really
only suitable for the risk-seeking investor.
Continue here:
Universal Stainless & Alloy Products May Be Bottoming, But The Future Remains Murky
No comments:
Post a Comment