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Xerium Technologies Inc. Message Board

  • chris_cs16 chris_cs16 Dec 11, 2013 12:12 AM Flag

    XRM Undervalued

    XRM - I have been buying shares of XRM in the $13's recently as the stock looks ready to break out of its recent trading range.

    The company has been reporting consistently improving financial results over the past several quarters and has returned to a sales growth situation. A lot of the credit for the turnaround comes from the company's new CEO, Harold Bevis.

    The company expects to continue to improve on its financial performance and expects EBITDA to increase 10% next year. This year, the company looks to generate approximately $110 million in EBITDA, an increase of 25% over last year. The company has a good amount of leverage, with total debt of $440 million, and net debt of $400 million. The company refinanced its existing debt into a covenant lite facility that improved the flexibility of the company and its ability to invest in growth. They are planning on continuing to close high-cost production sites in Europe and America and instead open low cost sites in Mexico and China.

    In August, the company announced plans to build a new, high-end press felt plant near Shanghai, China. This greenfield plant will employ the industry’s most advanced press felt manufacturing technology capable of supplying the highest quality products for the most demanding machines in the region. Production will begin in Q1 2015. The new plan will satisfy continuing demand growth from Asia and move production to a new state-of-the-art facility with the lowest production costs in the industry.

    The company currently trades at an EBITDA multiple of 5.5x. Albany International, a direct competitor of Xerium trades at an EBITDA multiple of 9.1x. The companies are similar in size as Albany generates $140 million of EBITDA. I feel that Xerium deserves to trade at a multiple similar to Albany. If that were to occur, Xerium would be worth well over $35 per share. I think Xerium will continue to trend higher and the gap in valuation between the two companies will subside.

    Sentiment: Strong Buy

6.35+0.09(+1.44%)May 27 4:02 PMEDT