Just on the horizon with a declining price trendline is Mine Safety Appliances (MSA). MSA is described by Mergent Online as, "...engaged in the global development, manufacture and supply of enhanced products that protect people's health and safety. Co.'s line of safety products is used by workers around the world in the fire service, homeland security, construction and other industries, as well as the military. Co.'s product offering includes self-contained breathing apparatus, gas masks, gas detection instruments, head protection, respirators and thermal imaging devices. Co. also provides an offering of consumer and contractor safety products through retail channels. As of Dec 31 2007, Co. operated through three geographic segments: North America, Europe, and International."
As of today, MSA is within 7% of the one year low. However, when we look at the technical patterns for this stock we see that MSA potentially could fall at least another 15% to 20%. According to Valueline, MSA typically trades at or near the 13x cash flow. Interestingly, this stock broke above the 13x cash flow level in 2004. Prior to this period, MSA was trading far below this level. In most instances 50% below the expected level of 13x cash flow. Be very watchful of this situation because this would indicate that MSA could trade, at best, to the $32 level and at worst, down to the $15 level. This belies the value of a company that has consistently increased it's dividend for over 34 years in a row.
While MSA has a volatile earnings history where only 8 of the last 16 years have had higher earnings the stock has had a doubling of the book value from $6 in 1998 to $12 in 2006. Another boost for this company is the fact that the number of shares outstanding has gone from 56 million in 1991 to 36 million in 2006.
As mentioned before, and should not be overlooked, this stock has had volatile earnings which may come to light once the shares are purchased. Also of concern is the most recent doubling the long term debt from $45 million in 2005 to $112 million in 2006. This is a very small number however we wish to recognize any and all discernable patterns that might emerge from this. Finally, the most unpredictable aspect of this stock is the past history of trading well below the 13x cash flow level. While this is a great stock to research in anticipation of the $38 one year low or the $35 trading range low since 2004 or the $32 level equaling the 13x cash flow level, an investor should take the attitude that whatever money they're putting in this stock is only half of the intended amount with anticipation of a potential price decline down the road.
The numbers regarding this stock were obtained from the Valueline dated January 25, 2008 and are not based on the estimates for the coming year(s). However, this stock has had good cyclical history which may prove useful when deciding to buy. All the best in your in research. Touc.
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