The shares of Universal Stainless & Alloy Products (USAP) have done well since I last wrote
on the company. Not only is the greater than 25% move in the stock
price strong on its own, but it is also quite a bit better than other
nickel alloy rivals like Carpenter (CRS) (up 10%), Haynes (HAYN), and Allegheny (ATI)
over the same time period. Better still, the aerospace market
opportunity continues to improve, backlog continues to build, and a
collection of adverse margin headwinds shouldn’t repeat.
While
I thought USAP was undervalued back in May, I was concerned about the
company’s challenges in achieving long-hoped for utilization improvement
and margin leverage. Those concerns are still in play, but backlog
growth speaks to suppliers ramping up ahead of expected production build
growth at Boeing (BA)
and other aerospace OEMs. I still think USAP shares look undervalued,
though, and I think the odds are improving that USAP is going to exit
2019 with more apparent business/earnings momentum and quite possibly a
healthier multiple as well.
Continue here:
Universal Stainless & Alloy Products Looking For Aerospace And Premium Offerings To Drive Leverage
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