Lydall Needs To Complement Good M&A With Better Internal Execution

Well off the beaten path and certainly not a strong performer over the past year, Lydall (LDL) is an interesting name to look it for what the company could be worth if management can improve their internal execution and drive some long-promised margin improvements. Lydall has a good track record with M&A, including the recent acquisition of Interface Performance, but between the challenges of the auto industry, material cost inflation, and execution issues, the company has not been performing up to its capabilities.

Betting on a company to get itself together and improve its operating performance always involves risk, and it is entirely fair for readers to question why they should bother unless and until the segment-level margin performance at least stops getting worse. That said, the valuation would seem to offer some upside based upon what I consider to be fairly conservative assumptions that leave room for upside if and when management delivers better results.

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Lydall Needs To Complement Good M&A With Better Internal Execution

Seeking Alpha: All's Well With Neenah Paper, But It's Priced Like It

What can I really complain about with Neenah Paper (NYSE:NP)? The shares didn't provide that pullback I was hoping for back in October and they're up about 12% from the time of that last article, beating other specialty paper companies like Glatfelter (NYSE:GLT), Schweitzer-Mauduit (NYSE:SWM), as well as Finland's Ahlstrom once you adjust for the currency moves between the dollar and markka. What's more, while the organic revenue growth hasn't been torrid, it's been quite solid relative to the underlying markets and segment-level profitability has been looking good.

If I'm going to complain (and regular readers know I'm going to...), it's about the valuation. The valuation does look a little stretched on an organic DCF basis, but not unreasonable on an EV/EBITDA basis nor when factoring in the potential benefits of further M&A. I'm not a big fan of "buy high and sell higher" with companies where the revenue growth potential is modest, but I don't think I'd be in any rush to sell these shares unless I knew I had a better idea to pursue.

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All's Well With Neenah Paper, But It's Priced Like It

Seeking Alpha: Neenah Paper Continues To Execute

I've had my issues with the valuation at Neenah Paper (NYSE:NP), but this specialty paper company continues to execute at a high level and the market has continued to reward that performance. While the shares have been basically flat since my last update, that performance is still quite a bit better than those of comps like Glatfelter (NYSE:GLT), Wausau Paper (NYSE:WPP), and Ahlstrom.

Sluggish European markets should be a challenge for the company's Technical Products segment, but filtration and specialty products continue to drive market-beating volume growth, while the fine paper business remains a very profitable business. With the balance sheet flexibility to add more revenue through M&A, I'm not worried about the company's ability to continue generating value-added growth. I'm still not overly excited about the valuation, with a DCF-based and EV/EBITDA-based approach bracketing about (5%)-15% potential, but I'd keep an eye on this name in the event that the market pullback takes these shares back to a more interesting price.

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Neenah Paper Continues To Execute

Seeking Alpha: Ongoing Challenges Pressuring Glatfelter

P.H. Glatfelter (NYSE:GLT) is one of those "toil in obscurity" companies that can put together good multiyear runs on the back of a perpetual willingness to restructure operations away from commoditzed products and toward value-added market opportunities that can support high single-digit returns on invested capital. While the market isn't ultimately going to care much (if at all) that Glatfelter's recent issues weren't entirely within management's control, this looks like a reasonable opportunity to acquire shares of a solid company in a largely overlooked sector.

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Ongoing Challenges Pressuring Glatfelter

Seeking Alpha: Neenah Paper Stays A Few Steps Ahead

Waiting for a better price on the stock of a company you like can work out really well sometimes, but then there are cases like Neenah Paper (NP) where the shares just keep marching upward - to the tune of better than 30% move since I last wrote about the company.

I do like the company's focus on value-added specialty papers where there is relatively less competition and less price sensitivity. I also like that management seems focused on identifying future acquisition opportunities, as free cash flow generation over the next few years should be in excess of the company's deleveraging needs. What I still don't like so much is the price you have to pay for all of that - I don't think the company has gotten 30% better in the last six months and while a company that can generate double-digit ROICs deserves a premium, this one still seems pricey.

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Neenah Paper Stays A Few Steps Ahead

Seeking Alpha: Neenah Paper's Specialty Focus Sets It Apart

If you're going to thrive in the paper and paper-related products industry, you need to find a way to set yourself apart. Low-cost production is one option, but Neenah Paper (NP) follows a strategy broadly similar to Glatfelter (GLT) - focus on specialty niches where customers will pay a premium and where it is possible to carve out market share on factors related to performance and not price. That strategy has already done a lot of good for the stock's valuation and though these shares aren't exactly cheap, the company's focus on growth markets and share, market, and product expansion give it above-average odds of future outperformance.

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Neenah Paper's Specialty Focus Sets It Apart