The three-year period from mid-2014 to mid-2017 wasn't especially kind to specialty alloy companies like Carpenter Technology (CRS), Allegheny Technologies (ATI), Haynes International (HAYN), and Universal Stainless & Alloy (USAP),
as a sharp market decline in energy and several heavy industrial
end-markets coincided with a sluggish period in aerospace that was
exacerbated by many industry players (especially on the fastener side)
moving to a more efficient inventory management approach.
It's
a different part of the cycle now, though, and Carpenter should enjoy
several years of good revenue growth and improving margins - not only
due to improving end-market demand and volume-driven leverage but also
significant changes brought about by the CEO in how the company
operates. Although the shares don't look like a bargain on the basis of
long-term cash flow, I think there's a credible argument for a fair
value in the mid-$50's to low $60's on an EBITDA basis, though I would
remind and caution investors that this is a stock to "date", not
"marry".
Read more here:
Carpenter Technology About To See A Significant Ramp
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