Pat McKeough responds to many requests from members of his Inner Circle for specific advice on Canadian stocks and other investments as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.
This week an Inner Circle member asked us about a Canadian stock that supplies the automobile industry with a range of products and technologies. Exco Technologies has seen its profits rise and Pat examines whether the outlook for car and truck sales in both North America and Europe will lead to further growth for the company.
Q: Pat: Hi Pat: What is your opinion of Exco Technologies?
A: Exco Technologies (symbol XTC on Toronto; www.excocorp.com), operates in two segments: Automotive Solutions and Casting and Extrusion.
The Casting and Extrusion business designs and makes die-casting and extrusion tooling, as well as consumable parts for aluminum die-casting and aluminum extrusion machines, which make parts by forcing heated aluminum through reusable moulds.
This division’s products include aluminum extrusion dies; moulds and die-casting equipment; and tooling systems for light-metal die-cast machines and extrusion presses. This segment also gives production tooling and technical advice to extruders and die-casters. Its customers are mainly automotive companies, but they also include industrial firms.
The Automotive Solutions segment designs and makes plastic trays and blow-moulded automotive cargo organizer systems. It also offers storage and restraint systems, injection-moulded consoles and gearshift boots. In addition, this business cuts and sews seat covers and headrests and makes instrument panels, sun visors and door panels.
The company was founded in 1952. It is based in Markham, Ontario.
Exco expects to gain from rising North American demand for cars and trucks
In the three months ended June 30, 2013, Exco’s revenue rose 5.4%, to $62.4 million from $59.2 million a year earlier. Earnings per share were unchanged at $0.14, but excluding a one-time tax adjustment, per-share earnings rose 21.4%, to $0.17 from $0.14.
Exco expects rising orders from automakers this year, thanks to improving demand for cars and trucks in North America. It also feels it will benefit from new or refreshed car models and powertrain systems.
The company holds cash of $25.1 million, or $0.62 a share, and has no debt. The stock trades at 11.1 times this year’s forecast earnings of $0.60 a share. Exco pays a quarterly dividend of $0.045, for a 2.7% annualized yield.
In the Inner Circle Q&A, Pat looks at whether rising orders from North America can offset slower demand from Exco’s customers in Europe. He concludes with his clear buy-hold-sell advice on the stock.
COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members
In recent years the auto industry has suffered setbacks in traditional strongholds like Michigan and Ontario. Yet the automobile remains the number one means of transportation in North America. Do you think the auto industry has entered a period of decline, or do you think it will continue to be one of North America’s key industries? Do you invest in automotive stocks? Let us know what you think.
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