According to GuruFocus Real Time Picks, Mario Gabelli (Trades, Portfolio) just made a reduction to CIRCOR International, Inc. (CIR, Financial). So, one question arises: What does Gabelli see to reduce that position?
Big Move
The company designs, manufactures and distributes valves and fluid control products in the United States and internationally. The company operates in two segments: Energy, and Aerospace and Defense.
We think market conditions in Europe to remain calm, while emerging markets recovery is practically a fact. But on the first days of December, the stock price saw a big move, the shares fell by over 6% on one day, and continues with the downward trend of the last month.
Financial Indicators
Going forward, we are going to see useful measures in investment analysis. Unfortunately, some of them (probably) show poor management decisions.
1) Revenues were down 5.09% in the most recent quarter compared to the same quarter one year prior.
2) Net income has decreased by 17.2% when compared to the same quarter one year ago, dropping from $17.72 million to $14.67 million.
3) Earnings per share declined by 17% in the most recent quarter compared to the same quarter a year ago.
4) Quick ratio of 1.75, which demonstrates the ability of the company to cover short-term liquidity needs.
5) Stock price has dropped by 24% in the last year.
Finally, I always like to see of one of the most important financial ratios applying to stockholders, the best measure of performance for a firm's management: the return on equity. The ratio has decreased when compared to the same quarter one year ago. I have to emphasize this because is a signal of major weakness within the company.
Final Comment
The challenges the company faces include the surges in commodity costs, which lowers margins. The result of these is probably higher prices and this could affect even more the firm´s revenues.
Year to date the company appears to be in a bear trend, sales and net income have dropped, and we expect this trend continues in the future. Some options in the Industrial Products sector include:Â Century Aluminum Co. (CENX, Financial), Norsk Hydro ASA (NHYDY, Financial) and TriMas Corporation (TRS, Financial).
Disclosure: Omar Venerio holds no position in any stocks mentioned
