Smith-Midland Corporation (SMID) manufacturers and sells concrete products (e.g. highway safety barriers, exterior wall panels etc.) for the construction and other industries. The stock has spent a good part of the last year trading above $2/share, but despite weathering the recession fairly well, it now trades at $1.40.
The company is not going to wow you with a steady earnings profile, as a couple of factors combine to make this a rather cyclical business. First, on the revenue side it relies on purchases from some industries that are rather cyclical. When the economy operates at overcapacity (as it does during a recession), construction projects get shelved. Second, the cost side of this business is rather fixed. In heavy manufacturing, certain amounts of fixed assets are needed to produce the finished goods, so cutting costs when revenue dries up is not an easy thing to do.
But for investors who can stomach the volatile earnings, the stock appears to trade at a discount to its potential earnings. While the company trades for just $6.5 million, it has pulled in net income of over $3 million in just the last 3 years. The company also trades at a 33%+ discount to its book value. Of course, as discussed above, if the economy remains weak, it would not be surprising to see net losses occur, but that's why the company trades at such a low price point; for those who think long term, this could be an excellent entry point.
One other point should be mentioned. This is one of the few Over-The-Counter (OTC) stocks discussed on this site. These stocks do not offer the same protections for investors as stocks traded on exchanges such as the NYSE or Nasdaq. Investors not familiar with these protections may wish to learn about them or stay away for now.
About the author:
Saj Karsan founded an investment and research firm that is based on the principles of value investing. He has an MBA from the Richard Ivey School of Business, and an undergraduate engineering degree from McGill University.
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC.
Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.