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Core Molding Technologies Inc. Message Board

  • hopeful200 hopeful200 Oct 4, 2005 2:44 PM Flag

    Learn how to read a balance sheet

    CMT is a strong buy right here, IMO. The fundamentals are not fairly priced by the market. There is not another way I know of to determine when the supply and demand curve is out of equilibrium than to do three things:

    First,determine if the company is fundamentally sound:
    CMT passes with flying colors.
    Strong liquidity, for example, current ratio over 2 to 1
    Good asset utility, for example Sales/assets of almost 2 to 1
    Good mgt. of financial leverage, for example, debt/equity under .4 to 1
    Strong return on equity of over 26%

    The balance sheet looks good, so CMT is fundamentally sound based on its published info.

    Second, determine if CMT is fundamentally undervalued relative to the its current price to the fundamentals found in its financials:
    Price/sales .39 to 1
    Price/book value 1.66 to 1

    Additionally, the book value per share is not only over $3.00, but is 95% tangible.

    This is one fundamentally sound company that is underpriced relative to its fundamentals.

    Third, and finally, the outlook is still indicated as good by mgt., inspite of a recent loss of a very small part of its business.

    When you find a low float stock with a rotten chart like CMT where the chart does not appear reasonable in light of the things that support the stock's price, that's buying low in my book. CMT is one I'll accumulate and hold here, thank you very much!

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    • Hi Meatball,

      My fishing (commercial) is on the Yukon our family has three drift gillnet permits there, and we target the kings in June. I haven't fished BB either with net or rod, but one of my super cub buddies wants to take me out for huge rainbows. I have been holding back on that one as he seems to be lacking in any fear for bears. They have some interesting issues looming with ongoing Pebble Mine development. Setuk...steelhead? I am obviously envious of you and Monty, my current fishing requires chipping thru 20" of ice just to get started, but one is rewarded with 2 kinds of whitefish, burbot, sheefish, and pike. Hoping cmt can see some "irrational exzuberance" after it clears 13.


    • meatballmanfred

      We do indeed share a common geography. On selling. It depends on whether one is a trader or an investor. I am an investor. So the only thing that will cause me to sell is if either the story on CMT changes negatively or the pps gets too high relative to my own metric for valuation.

      With the 4th quarter promising to be quite robust and the pending details of the Premix acquisition (if it goes through) to be revealed early in 2007, I suspect that there could still be a lot of interest which will push the stock along. We know what happened last time the momo players got involved. I am not suggesting it will be the same but it is possible. However the collapse last time was precipitated by the Yamaha announcement which caused the stock to go into a tailspin. Absent the Yamaha announcement and it is hard to know whether the pullback would have been as violent. There was also a moderately violent reaction to the last quarter last year when the company fell short on the underlying growth but the headline was a lot different because in 2004 there had been a large tax loss write back which made the comparison look far worse.

      However the stock has been consolidating now for such a period that it may propel itself more gently and on a more sustained basis. Add into the mix the latest PMI and ISM figures suggesting a contraction in manufacturing generally and with the knowledge that CMT itself has acknowledged that the bubble in heavy truck sales going into the 4th quarter this year will deflate early in 2007 and we might have reason to anticipate a pullback.

      The market is not rational, so I suppose if the upward momentum picks up the way to exit is incrementally as the price increases. You won't get the top but you will take some profits and let some ride until you either run out of stock or the momentum ceases. I picked some trading stock as soon as I saw the latest figures and have traded some of that already. But I have not touched any of my core holding because I suspect that there is room for some p/e expansion. Here are a few factors which I think are interesting for the next quarter and the direction of the pps:

      1��The diluted eps so far this year is 74c. The 4th quarter last year was 25c. So just repeating last years quarter will give 99c. Last year the total was 60c for the year.

      2��The final quarter this year will be a lot higher than last year simply because of the heavy truck sales we know of generally, the improving margin and the impact of Batavia. Tooling sales will also be up on 2005 but down on the 3rd quarter 2006. So take you guess at what the figure will be. If the 3rd quarter doubled over 2005 will it double again in the 4th quarter? Personally I think it will be a stretch but if it did we would be looking at 50c. Then the diluted eps for the year will be $1.24.

      3��What is a reasonable trailing p/e? At 10 the pps is $12.40. At 12 the pps is $14.88.

      4��Interestingly there has been some contraction during this year in the diluted shares outstanding due to option expiration. So that will give a little push to the diluted pps.

      5��If there are some negative comments going forward for a quarter or 2 in relation to heavy truck sales, how much will positive comments going forward on Premix add assuming something uncovered in the DD does not cause the deal to fall over? The truck sales should now be in the price. Premix cannot reasonably be in the price to any large extent because we don't have enough details.

      So all in all, IMHO we have some exciting times ahead in the next couple of months.

      Good luck


    • Monty - Fishing and Skiing - sounds like we might share residence in Colorado.

      RE: CMT, I guess the challenge now is knowing when to sell. I have a number of bad memories of selling too soon. Sold GLW, USG, UPL in single digits while they all went on to be big, big winners. It would seem that if this breeches its highs during the days of being an IBD darling and a Nav pick (=$13), it might have some room to run. What is your thinking on this? Meatball

    • Actually the fish I brought home came from Kodiak but I do love going on the Situk. You fish the Bristol Bay area?

    • meatballmanfred

      Well done. Glad you stayed the distance. Patience does have its rewards. Too cold to comfortably fish where I am. I ventured out on to the river 2 days ago and the guides iced up every 3 or 4 casts. The trout were taking midges so as soon as it warms a little, I am on it. I went skiing instead and let the share price rise.


    • Meatballs,

      Just curious, I live in SW Ak, were you fishing SE Ak? Thanks for resurrecting this string, lots of the posts relevant to today's reality.


    • Thanks for the advice Monty. All you mention is the way I think. However, I just never considered a "give back" would be this significant.

      I do not pride myself on giving the MM's the gratitude of shaking my positions and sell when I see fit.

      Computer off now and heading back in to the office

    • Why is there no indication how the company is doing? Because the quarter is just ended and they are just putting the numbers together. They generally announce earnings just before the SEC deadlines, not early.

      There are few, if any, announcements in between earnings statements. This is a small company trading on AMEX. Nothing close to a Fortune 1000. No professional investor relations staff. Just the people who run the company.

      The only way to keep their focus on running the business and their nose clean with respect to the SEC is to handle it the way they do. If you want more information, news releases and the like, you want a different stock.

      The fundamentals here are very solid. This is not a growth stock like Dell in the 90's, but it IS undervalued right now. The PE is way too low and that will be recognized by the market at the next earnings release, probably early November.

    • eneles

      The market will always break your heart if you make yourself vulnerable to it. Have a look at the overall market today. The sentiment is negative. A lot of investors are running scared. A lot of other investors are loving it, buying on dips which they consider they won't see again. A lot of investors who margined their stock will be getting belted. That will drive stocks lower. Market makers will see the opportunities and clean out tons of stops on lots of stocks and set themselves up for gains. It�s a jungle. Risk and reward go hand in hand. Get a grip. Do you consider that the fundamentals are fine? If so stick with your decision. If something has changed then reassess. What do you expect the company to do? Do you want them to employ staff to babysit nervous investors. Earnings will be announced soon. If you make a big gain are you going to give some back because you think it is too much and some poor sap who sold to you at the bottom missed out?! Of course not. The paramount thing is to preserve your capital. If you cannot afford to lose what you have risked then you are silly. Be patient. After you have assessed your position, make your decisions and act accordingly. After that turn off our computer and go for a walk. Go to a movie. See the colors of autumn. It snowed last night where I am up high. Its as pretty as a picture. My children are running around laughing. Life is good. I'm going to catch a fish.

      This is your shrink signing off. Good luck. Monty.

    • Monty, I am a chart observer. I was drawn to this stock by the mere fact that at one time they were on the top of a query of correcting stocks with good fundamentals and PE.

      I checked out the company and fundamentals and gained entry at 7.22 then again at 6.70 and again at 6.36 giving me a very sizeable position now with a cost basis at 6.77.

      As of right now this has been by far the biggest miss i have ever made buying a position and even more unsettling is i believed enough not to hold to my 15% loss rule looking for the increasing MACD.

      Bottom line is that after a -63% decline from the 52wk high in less than 90 days, why is there no indication how the company is doing?

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