Wednesday, November 25, 2009

Broadpoint Amtech's top ten reasons to own Precision Castparts (PCP)

A refreshingly straight-forward analysis, how nice.  Broadpoint Amtech lays out their reasons for owning Precision Castparts(PCP), a diversified metal fabrication company.


Broadpoint spends much of their time focusing on the aircraft-relates business, which is about 53% of revenues and sure to climb as Boeing's 787 program kicks off in earnest in the next 12months.



The top ten....


10) IGT demand and Seamless Pipe for India and China remain healthy, 
9) High 787 content will offset any OEM softness as it ramps 
8) Drop in narrow-body airplane production rate will have limited impact
7) Robust Free Cash Flow coupled with stellar balance sheet
6) Continuous improvement philosophy of PCP still driving margins
5) Prime opportunity to further acquire and vertically integrate 
4) Incremental growth from fastener market share gains
3) Dominant market share in core Castings, Forgings and Seamless Pipe 
2) Caledonian acquisition gives PCP advantage competition cannot match
1) Mark Donegan and executive team.


Regarding that "robust" free cash flow - yes, 'tis robust, but the shares have caught up with it.  The company currently sports a Free Cash Flow Yield of about 6.4%, based on an average of 2007-2010 Free Cash Flow.  Not enough juice in that yield for me to chase.



Copyright 2009 AlphaNinja


PCP

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