Nearly four years ago, I was cautious (if not outright skeptical) about the prospects for Lawson Products (NASDAQ:LAWS) leveraging a change in its operating model to drive meaningfully better operating results. Management has delivered, though, with gross margins up more than three points, operating margins in the black, free cash flow in the black, and the company well-positioned in its core service-driven MRO space.
The market has noticed, with Lawson shares significantly outperforming MSC Industrial (NYSE:MSM), W.W. Grainger (NYSE:GWW), and Fastenal (NASDAQ:FAST) since that last report on Lawson, though it took about a year or so for the Street to come around to the positive implications of Lawson's changes. While the shares don't look radically undervalued today, there are still above-average growth opportunities for Lawson to pursue and the company is not well-covered nor over-owned by institutions. What's more, Lawson should be relatively well-placed to benefit from improvements in industrial production in the U.S., should those take place.
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A Different Model Has Made A Difference For Lawson Products