I am a newbie to this board but a long time Fool over at the Mechanical
Investing Board and BRK Board.
I have always been interested in finding ways to invest a portion of my
funds in other individual stocks and was excited to recently come
across this board. I have ready the Knowledgebase and thought I’d take
a stab at it with a few stocks I have found interesting.
This is the first of what I hope will be a few posts of companies that
this board may not yet have looked at. As I am new at this, I strongly
welcome suggested corrections and improvements to my methods!
Following a somewhat recent posting of Saul’s for LGIH, here is an
analysis of AMWD.
American Woodmark Corporation manufactures and distributes kitchen
cabinets and vanities for the remodeling and new home construction
markets. The Company offers framed stock cabinets in approximately 600
different cabinet lines, ranging from relatively inexpensive to
medium-priced styles. Styles vary by design and color from natural
wood finishes to low-pressure laminate surfaces. The product offering
of stock cabinets includes 85 door designs in 19 colors. Stock cabinets
consist of cabinet interiors of a range of dimensions and construction
options and a maple, oak, cherry, or hickory front frame, door and/or
drawer front. The Company’s products are sold under the brand names of
American Woodmark, Timberlake, Shenandoah Cabinetry, Potomac and
Waypoint Living Spaces.
Quarter Revenues GAAP Earnings Adjusted Earnings Shares Outstanding (M) GAAP EPS Adjusted EPS FY2015 Q2 256 18.2 18.7 16.5 1.10 1.13 FY2015 Q1 231 15.2 15.8 16.4 0.93 0.97 FY2014 Q4 207 11.3 11.9 16 0.71 0.75 FY2014 Q3 189 7.3 7.7 16.1 0.45 0.48 FY2014 Q2 218 7.7 8.3 16 0.48 0.52 FY2014 Q1 212 9.2 9.7 15.8 0.58 0.61 FY2013 Q4 189 5.6 6.1 15.7 0.36 0.39 FY2013 Q3 169 2.9 3.4 15.8 0.18 0.22 FY2013 Q2 190 5.3 5.9 15.6 0.34 0.38 FY2013 Q1 178 6.6 7.2 14.8 0.45 0.48 FY2012 Q4 171 5.2 5.7 14.9 0.35 0.38
Quarter T12 Adj Earnings T12 Adj EPS T12 Revenue T12 EPS Growth QoQ T12 EPS Growth FY2015 Q2 54.2 3.33 883.00 92% 23% FY2015 Q1 43.8 2.71 845.00 70% 15% FY2014 Q4 37.7 2.36 826.00 61% 18% FY2014 Q3 31.8 2.00 808.00 37% 15% FY2014 Q2 27.5 1.74 788.00 9% FY2014 Q1 25.1 1.60 760.00 9% FY2013 Q4 22.6 1.47 726.00 0% FY2013 Q3 22.2 1.46 708.00
- Fiscal Year starts May 1 of each year, so FY '16 started May 1, 2015
Adjusted EPS adds back stock based compensation. They do have
significant pension benefits, but I am unsure how to treat those and
would appreciate anyone’s thoughts on those!
My conclusions from the tables above:
- Revenues show continued growth, but at a MUCH slower rate than EPS.
This could be signs of economies of scale being achieved. It is
hard to say how long the growth rate gap will continue to increase
as it is dependent on their current capacity constraints.
- Adjusted T12 EPS are accelerating, both Year of Year and Quarter
Current Stock Price 77.82 Current Adj PE 23.39 1 Year EPS Growth 92% 1YPEG 0.255 Analyst Est. 1 Year EPS Growth 19% Tax Rate 36% Insider Ownership 15% Current Ratio 3.05
Note: Analyst EPS growth is for FY17 vs FY 16
My conclusions from these statistics:
- Analysts are indicating a strong slowdown in growth. Looking at
their past estimates on Yahoo, I see patterns of sigificant
underestimation, up to and including recent quarters. I need
to this discrepancy before investing.
- Very attractive 1YPEG
- Relatively high insider ownership
- Solid ability to cover near-term debt obligations
Stock Appreciation Scenarios EPS Growth Lower Same Higher 19% 92% 114% P/E Lower 21.1 7% 72% 93% Same 23.4 19% 92% 114% Higher 35.1 79% 187% 222%
The scenarios above assume either T12 Adjusted EPS coming in where the
analysts expect, staying flat to the most recent quarter, or 10% above
that. P/E assumptions are either a slight decline, flat, or 50%
increase that seems more commensurate with such a high EPS growth
My conclusions from / thoughts on the above scenarios:
- EPS is growing much more strongly than revenues, this may mean we
have a sleeper stock, that they discovered a number of “one-time”
efficiency gains that may not hold up, that they are enjoying
economies of scale (which might or might not be reaching their
limits). Tough to say which.
- Upside strongly outweighs the downside. If EPS growth does continue
on trend, the “Higher” cases seem more likely. If EPS only grows
in line with past revenue growth, the lower cases are more likely.
- Rising interest rates hurt homeowners ability to renovate kitchens
or for slow down the new construction market.
- Broad economic slowdown in the US slows sales and depresses prices.
- They have reached scale and growth will decline. The US cabinet-
making market is $14B, giving American Woodmark about a 5% share.
They are a “significant” player - already nationwide and in Lowes
and Home Depot. That said, with such strong earnings growth, they
have the ability to continue to grow revenues but it may be at the
expense of earnings through reduced prices.
- This seems like a strong play to me. With the recent stock market
correction, it is a good time to buy if one is interested (I am).
- I believe this is stock that at worst will “market perform” and at
best could be a huge gain in a relatively short time frame once
Mr. Market notices what he has been missing (should current trends
continue or not decline significantly).
What does everyone else think of this opportunity?