The Best Capital Goods Stock To Buy Now, +16.1% Upside
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We review the best low price stock to buy now that is in the
Capital Goods Sector and Industrial Equipment Wholesale
Hi everyone happy new year. Mathis Conner here with Conner
Management Group. This week
we're going to look at the best capital goods stock to buy right
now. Today is Friday, January
3, 2014. The industry of this capital goods company and is in
industrial equipment wholesale and we see the 12 month upside as
on to the second slide and we see the name of the company is called
MSC Industrial Direct.
MSC industrial direct. And its ticker symbol is M S M. Let's see
and as mentioned
industrial equipment wholesale is the name of the industry and
upside potential is at 16.1%.
On to some quick facts about MSC. MSC together with its
subsidiaries markets and distributes
metalworking and maintenance repair and operations supplies
primarily in the United States. Its
MRO products, which is maintenance repair and operations, comprise
include cutting tools measuring
instruments tooling components metalworking products fasteners
things of that nature. Things
that are used to manufacture a lot of end retail type goods. We
will see what some of
the products are on there on the following slide. The website for
MSC is MSC direct.com
the company is headquartered in Melville New York founded in 1941.
The number employees
stand it 6,133. Another interesting tidbit is that the officers and
directors the company owns 20.1% of the
the company in total. Thats a nice chunk for a company the size is
it still see in a second.
They are in the services sector and once again the industry is
industrial equipment wholesale.
Their revenues the last 12 months have stood at $2.42 billion the
net income was $249 million
and the cash from operations was $335 million. The market
capitalization for MSC is $5.1
billion. This definitely a sizeble company. On to the products and
services page is now got some pictures
of the products that they market and distribute so just a lot of
hard-core basic product used
for manufacturing and maintenance. You've got pictures here of a
vice, hand tools like a wrench, hole making items like
drill bits, cutting tools, other kinds of machinery, saw blades,
soldering equipment, HVAC fans, pipe related items like valve,
janitorial and facility
maintenance type equipment, frequently seen things like buckets
with mops, and stuff like electric motors,
power tools - just real hard-core basic stuff. One area to pick up
in there business -they have
one excerpt from the web site that says " emergency preparedness
supplies". So you know you can
imagine that with things like Hurricane Sandy and other disasters
the country, their products would be in great demand. So thats what
we have for their products and
services page. On to some of their metrics. As we mentioned annual
revenues last 12 months
has been spent $2.4 billion, net income 249 million, cash from
operations 335 million. Their
operating margins for 2012 was 19%. And the operating March 2013
declined slightly to
18% - we consider that flat. On to the valuation metrics. The
trailing P/E ratio for MSC stands
at 20.4. The forward P/E ratio stands at 18.0 So we expect to see
some some growth in earnings
going forward. The PEG ratio is at 1.9. The Price to Sales ratio is
2.1. The Price to Book ratio is at 3.7. And the
Enterprise Value to EBITDA ratio is 12.2. So the valuation metrics
aren't crazy cheap or expensive overall - just somewhere somewhere
in the middle. The
recent closing price of MSC stands at $80.74 and that was
yesterday's close. The 52-week
low was $71.44 and 52-week high as $87.92. The 20 day moving
average is now at $79.67.
The 50 day moving averages at $78.70. And the 200 day moving
average is at $80.06. So that
that is a pretty tight grouping which which reflects its overall
tight trading pattern, over the past
year. Right now the recent closing price of $80.74 is closer to the
52-week high of $87 than closer
to its low. The average daily trading volume of MSC stands at
425,000 shares per day day.
The beta of the stock is 1.0 basically implying that the stock has
tended to move
with the market fairly lock-step, up and down. The dividend yield
is modest. It stands at
1.6%. The average dividend payout ratio over the last five years
has been on 31%.
So taking at look at its chart for MSC, the stock has really just
bounced between $76 and
roughly $85 several times throughout the year. The stock started
out around mid February
around $86 dollars and then it fell to at $76 around late April
then in rose to $84
in late May then it declined again to $76 in early July and went
through this cycle another two or three times
until late December it got up about to $85 again and now its down
So this stock has a flat pattern overall. It has
bounced back and forth. But we see some some upside here some with
Also the operating margins are expected to increase the next of the
next 1 to 2 years.
They made an acquisition of another company. So they will be
marketing and distributing
some higher-margin products. The name of that was called
So on to the next slide. The financial statement quality of MSC
consider to be excellent. They have very good financials. The sales
past five years have averaged 10.5% per year.
Total debt stands about $300 million against $2.5 billion of
revenue. That's fairly modest. We see the operating margins
Right now the operating margin trend is flat and the price trend is
as flat as well.
Now the overall market outlook we continue to see as bearish. We
wouldn't be surprised at
all to see some names pullback or there just not be much
advancement over over the next
quarter so, at least. So we'll see. The recent closing price of MSC
right now stands
$84.74 and we see its 12 month price target and $93.74. So the 12
potential at MSC we see as
6.1%. Now the return is not high as some previous finds we've found
but we think this is just
a reflection of the market getting more expensive and there not
being as is many upside opportunities.
But nonetheless we still believe that MSC is the best capital goods
company to buy
right now. This is something for you to consider adding to your
portfolio. If you are looking to do some
diversification especially into this sector, the capital goods
sector, this is a stock we think you
should closely consider. And on to our last slide which is a just
overall slide about Conner Management Group.
This is just a reminder to check out our Saturday
morning newsletter which you can get by going to
www.gmcstockpicks.com and there you can hear
about the best opportunities such as this one and other just
general market information.
All of our stock picks are driven by our proprietary algorithms
where we look at over
3500 stocks every week. We are pretty pleased with what we
developed. We are new on the block
and we are looking to show everyone just how good we are. So go to
GMC Stock Picks.com to sign up
for the newsletter and get that on Saturday mornings. We think
you'll be pleased wit it.
So that's all that we have for this week. Talk to you soon. Take
About the Podcast
The Best Stocks To Buy is a brand of Conner Management Group, LLC, an SEC registered managed account money manager. We use our own proprietary algorithms, not available anywhere else, to review, analyze and rank over 6,000 stocks every week for the benefit of our clients and online subscribers. We use the principles of value investing. Our goal is to help our clients grow their IRA and retirement assets faster using a concentrated portfolio of stocks. Our Youtube channel and podcast is a complement and alternative to shows and publications such as Jim Cramer's Mad Money, NPR Planet Money, Suze Orman, Dave Ramsey, Curzio, Covel, The Disciplined Investor, CNN Money, Money Magazine, TheStreet.com, Fortune Magzaine, Kiplingers Magazine, Morningstar, MarketWatch.com, Freakonomics, and This American Life. Learn more about us at www.connermg.com .