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Staples, Inc. Message Board

all4wishes 1 post  |  Last Activity: Jan 14, 2016 2:46 PM Member since: May 15, 2007
  • Good Seeking Alpha article from last week on Gencor. Paolo should have also mentioned that even though the company's revenues declined by over 50% from 2008, Gencor was profitable every year except one year. Now they appear to be lean and ready to ride the highway bill.

    Jan. 6, 2016 11:46 AM ET

    Summary
    We have reason to believe Gencor Industries is at the very start of a large favorable cycle.
    This reason is underscored by two very obvious catalysts.
    We also have concrete evidence that the company is already seeing improvement and the improvement will become evident when it reports Q1 FY2016 earnings.
    Sometimes, circumstances align in such way that a significant cyclical bottom can be predicted with a high degree of certainty. Such is the case with Gencor Industries (NASDAQ:GENC). After several years (since 2012) of declining revenues and operating income, GENC is at the very cusp of a significant reversal in fortune.
    What is more impressive is that because of a couple of factors, this reversal is plain to see. Yet the company still trades for not much more than cash on hand. This article will cover GENC's unique circumstances.
    Business
    GENC's main business consists of manufacturing and selling equipment used to produce highway construction materials, namely asphalt.
    Thus, GENC sells machinery to highway/road construction companies. Its fortunes are dictated by investment in highways and roads, especially if such construction uses asphalt as a paving material.
    Valuation
    After a prolonged decline in business activity, GENC is at a point where it's hardly printing positive EBITDA. During FY2015, it had barely $0.5 million in EBITDA (though EBITDA was still positive).
    Its business, as the business for most equipment/capex sellers, is cyclical. This means that seeing very low profitability (as measured by EBITDA) at the bottom of a cycle is not that surprising. It also means that using EV/EBITDA as a measure of value is strongly misleading at this point.

    Sentiment: Buy

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