Saturday, June 9, 2018

Self-Help And Stronger End-Markets A Powerful Combo For Materion

Most specialty alloy companies have enjoyed a good run over the past year, and Materion (MTRN) has certainly been among them with a 40%-plus move since my last update on the company. Not only has aerospace demand come to life, but Materion has also seen stronger momentum from its industrial and consumer electronics customers. Making things even better, the company’s cost-reduction/efficiency moves seem to already be paying dividends, and the company’s efforts to expand its new product contributions appear to be ahead of schedule.

Materion has done better than I’d expected it would last summer, but the valuation gives me some pause. I’m not surprised that the shares look pricy in DCF terms, but the EBITDA-based valuation is a little more limiting to my enthusiasm. Materion trades at around 12x forward EBITDA and I’d be reluctant to pay much more than that (frankly, I’d be reluctant to pay that much). Strong end-markets and ongoing margin improvement can still drive higher estimates, but the multiples already look pretty fair.

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Self-Help And Stronger End-Markets A Powerful Combo For Materion

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