LINAMAR CORP. $20 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.6%; SI Rating: Extra Risk) gets about 90% of its revenue by selling transmissions and other parts to several carmakers. The company also makes self-propelled, scissor-type elevating work platforms under the Skyjack name, plus consumer products, such as lawn mowers and cargo trailers.
Linamar continues to benefit from rising car sales in the wake of the recession. It cut 40% of its workforce during the downturn, but has rehired many workers as car sales recovered. Still, the company expects its cost-cutting plan to lower its annual expenses by $60 million, starting this year.
In the three months ended June 30, 2010, Linamar earned $26.6 million, or $0.41 a share. That’s a big improvement over its year-earlier loss of $10.1 million, or $0.16 a share. The year-earlier results excluded severance payments and write-downs of plants and equipment.
Sales rose 50.4% in the latest quarter, to $568.4 million from $378.0 million. Sales of transmissions and other auto parts rose 61.6%. That more than offset a 17.5% sales decline at its industrial-equipment division. The drop was caused by lower demand for farm equipment in Europe, and falling sales of consumer products internationally.
The company’s long-term debt of $218.7 million is a low 17% of its market cap. As well, it holds cash of $119.2 million, or $1.84 a share.
The stock has soared since it fell to $2.00 in March 2009. Even so, it trades at just 13.2 times the $1.51 a share that Linamar should earn in 2010.
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