Seeking Alpha: Multi-Color Stumbles A Bit, But Still Has Ample Room To Do Better

It has been a while since I've thought Multi-Color (NASDAQ:LABL) shares were truly undervalued, but I've been reluctant to sell out of a story with good underlying momentum and significant long-term share growth and margin leverage potential. Even with the 5% drop on Friday in response to fiscal fourth quarter earnings, the shares are up about 10% over the last six months and more than 70% over the last year - not a bad return on patience.

I continue to expect Multi-Color to modestly outgrow the industry on an organic basis and supplement that internal sales growth with additional M&A. The label industry remains extremely fragmented and while it does not require tremendous capital investment for long-term competition, I nevertheless believe that scale still matters and favors players like Multi-Color and CCL Industries (OTC:CCDBF). Two of the biggest opportunities for Multi-Color remain in improving operating margin and asset utilization, as both could unlock greater free cash flow production. As is, the shares look fairly valued to slightly undervalued.

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Multi-Color Stumbles A Bit, But Still Has Ample Room To Do Better