Best to Walmart; FLKI just reported blowout earnings: an increase in operating margins from 17 percent to 45 percent, with net operating revenues up 34 percent on rising product demand.
It is not every day investors have the opportunity to get the best of the Old and New Worlds: capitalize on a strong U.S. Dollar by buying a Euro-based multinational company with impressive financials. Falken Industries Ltd. (FLKI) is a leading global manufacturer and commercialization of high-end specialty cleaning products for industrial, professional and consumer uses.
Under its brand name Clean Plus, Falken Industries has successfully launched more than 160 professional and consumer auto care products which are sold in over a dozen international markets, including recently signed Australia and Russia. Clean Plus products are available in over 1000 petrol stations and other outlets throughout Europe.
Key Investor Points
Falken Industries sales volumes have more than doubled over the past two years, with continued record growth. Q1 2012 revenues increased 30% over Q4 2011 along with record profits. Q2 is even more remarkable: net operating revenues even after unfavorable net currency adjustments to the strong dollar increased 34% from the year-ago quarter while net operating margins were up 17% to 45%
Profits (PPS) were a solid 2 cents per share on an annualized basis.
The company is experiencing impressive expansion, including recent signed agreements with distributors in Norway, Russia, and Australia.
Falken Industries supplies the global markets of major petrol distributors, including Shell, BP, Esso, Q8, Statoil, Hydro-Texaco, Olis, Agip, and Cepsa.
Despite record impressive performance and profits, Falcon Industries is trading at a heavy discount: 30% of its book value. This anomaly is largely due to the current economic downturn in Europe, which has affected exchange rates between the Dollar and Despite record impressive performance and profits, Falcon Industries is trading at a heavy discount: 30% of its book value. This anomaly is largely due to the current economic downturn in Europe, which has affected exchange rates between the Dollar and the Euro. Since the company’s financial reports are primarily denominated in Euro, the monetary figures are artificially diminished as a consequence of U.S. Dollar reporting. This has fueled exaggerated fears resulting in a heavily-discounted PPS, despite strong fundamentals.
This temporary fluctuation is expected to be corrected as the currency markets stabilize. In the meantime, Falken management has responded with initiatives designed to capitalize on the weaker Euro and stronger Dollar by expanding into U.S. and Canadian markets. The trade-off is huge, offsetting by far any currency conversion loss. It is only a matter of time before the stock starts to reflect the fact that its products have up to a 50% price advantage over competitors.
All this presents a unique opportunity for investors to buy at an artificially low PPS before the inevitable adjustment of the currency exchange rates reveals the true strengths of this rapidly growing company.