LINAMAR CORP. $15(Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $970.5 million; Price-to-sales ratio: 0.4; Dividend yield: 2.1%; TSINetwork Rating: Extra Risk; www.linamar.com) makes transmission and driveline systems for carmakers in North America, Europe and Asia. Its other products include engines and self-propelled, scissor-type elevating work platforms, which it sells under the Skyjack name.
The company continues to benefit from the recovery of the global auto industry. Linamar also bought three plants in France for $30.1 million in February 2011. These plants supply cylinder heads, gears and other parts to French carmakers Renault and Peugeot.
In the three months ended September 30, 2011, Linamar’s sales rose 30.4%, to $725.6 million from $556.3 million a year earlier. Sales at the powertrain/ driveline division (which accounted for 88% of overall sales) rose 38.6%. Sales at the industrial products division (12% of sales) jumped 123.3%.
Linamar earned $25.1 million, or $0.39 a share, in the quarter, up 44.3% from $17.4 million, or $0.27 a share, a year earlier. These figures exclude unusual items, such as costs to integrate the new French plants.
The company borrowed the money it needed to buy the French plants, as well as pay for a new plant it is building in China.
As a result, its long-term debt shot up from $187.1 million at the end of 2010 to $487.3 million as of September 30, 2011. Even after this jump, its debt is still a manageable 50% of its market cap.
The company will probably earn $1.59 a share in 2011. The stock trades at 9.4 times that estimate. Linamar’s earnings will probably rise to $1.91 a share in 2012. The stock trades at a low 7.9 times that figure.
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