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Standex International -- this rally only the beginning?

As I was poking through the Alert HQ results of the last few days, one company’s name seemed to keep popping up: Standex International Corporation (SXI).

Standex showed up on the following screens/reports at TradingStockAlerts.com:
Furthermore, if you enter the symbol into the Stock Search function on TradingStockAlerts.com, you will see that Standex comes up as a BUY there, too

Background --

Standex International Corporation is a small-cap diversified manufacturing company with the following five divisions:
  1. Food Service Equipment Group - manufactures commercial food service equipment for restaurants, convenience stores, quick-service restaurants, supermarkets, drug stores, hotels, casinos, and corporate and school cafeterias, as well as serves health science and medical markets. 
  2. Air Distribution Products Group - manufactures metal ducts and fittings for residential heating, ventilating, and air conditioning applications. 
  3. Engraving Group - offers texturizing molds used in the production of plastic components and embossed and engraved rolls and plates, as well as process tooling and machinery serving the automotive, plastics, building products, synthetic materials, converting, textile and paper, computer, houseware, and construction industries. 
  4. Engineering Technologies Group - provides solutions in the fabrication and machining of engineered components. 
  5. Electronics and Hydraulics Group - provides single and double acting telescopic and piston rod hydraulic cylinders to manufacturers of dump truck and dump trailers, and other material handling applications, as well as offers switches, electrical connectors, sensors, toroids and relays, inductors and electronic assemblies, fluid sensors, and magnetic components for various industries. 
The company has operations in the United States, Europe, Canada, Australia, Singapore, Mexico, Brazil, Turkey, South Africa, India and China

Financials -- 

The reason the company is showing up on the growth-related report mentioned above is easily seen by looking at the history of revenue and earnings. The following is from Google Finance:


Note the most recent data point where revenue powered higher (14.9% y-o-y and 19% sequentially), earnings increased (22.7% y-o-y and 85% sequentially) and margins improved as well.

Valuation -- 

The market does seem to be discovering this stock but it is not yet over-priced. According to Yahoo Finance, its trailing PE is under 13 but it’s forward PE is barely over 10, PEG is only 0.86, Price-to-Sales is a mere 0.69 and Enterprise Value/EBITDA is a quite reasonable 7.32. Price to Free Cash Flow is 9.28, less than half the industry average.

Return-on-Equity is over 16 which is pretty is decent. Debt-to-Equity is not insignificant at 21 but is still better than the industry average.

The company recently declared its 188th quarterly dividend and offers a yield of 0.70%, not huge but a reassuring sign of a steady company.

The Chart -- 

The stock has taken off over the last couple of weeks as the following chart shows:



Not only has it zoomed above its 50-day MA and its 200-day MA, but it has eclipsed the high set back in July. In addition, those moving averages are now both pointing upward, implying the company is coming out of its tailspin. 

Conclusion --

Standex has good fundamentals, qualifies as a “reasonable value” investment candidate and the chart suggests the recent downturn has come to an end.

The company is benefiting from cost reductions implemented in 2009 and 2010 and from a careful acquisition strategy (four companies purchased in 2011 which increased product, technology, customer and geographic footprint). Though consistently profitable, Standex seems to be growing earnings again and has turned the focus from cost containment to top-line growth. Initiatives include new product introductions, expansion of product offerings through private labeling and sourcing agreements, geographic expansion of sales coverage and the use of new channels of sales, leveraging strategic customer relationships, development of energy efficient products, new applications for existing products and technology and next generation products and services. The company has also been able to raise prices in response to commodity inflation.

Being a small cap, the company doesn’t get a lot of attention in the financial press (though Zacks singled it out earlier this year as a strong buy) but it is clear that investors are really hopping on board lately. After the recent steep price run-up (over 30% in the last couple of weeks!!), buyers might want to wait for a pullback. Watch for it to fall back into the range between the June peak around $35 and the 200-day MA around $32.

Disclosure: no position

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