Commercial Vehicle Group (NASDAQ:CVGI)
continues to see fierce headwinds across its business from the weak
end-market demand for North American heavy trucks, construction and ag
equipment, but management's efforts to improve the cost structure and
cash flow are paying off. The market has noticed, with the shares more
than doubling since my last update and trouncing the performance of other commercial vehicle suppliers like Cummins (NYSE:CMI), Allison (NYSE:ALSN), and Grammer (OTC:GMEGF).
Looking
ahead, I'm cautiously optimistic that there is more upside potential.
Management has meaningfully improved the cost structure and margins of
the Construction/Ag business despite ongoing revenue contraction and the
Truck business should start to improve later in 2017 as the commercial
truck market stabilizes. If Commercial Vehicle can grow revenue at an
annualized rate of around 2.5% from the trough of 2017 and generate FCF
margins in the 3% to 4% in the better years ahead, a fair value above $7
is still plausible.
Continue here:
Commercial Vehicle Paddling Through The Rapids
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