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Saj Karsan
Saj Karsan
Articles (5982) 

Investment Value Analysis for AM Castle (CAS)

March 11, 2009 | About:
Yesterday, stock in AM Castle (NYSE:CAS), a diversified metals and plastics distributor, rose 52% after the company beat analyst expectations for its most recent quarter. While it is difficult for non-insiders to predict that companies will beat expectations in any given quarter, it is not so difficult, especially in this market, to find companies with limited downside and tremendous upside potential. To illustrate this, consider these select items from AM Castle's balance sheet prior to yesterday's announcement:


Cash: $18M

Receivables due from customers less doubtful accounts: $204M

Inventory (at lower of replacement and fair value): $450M


Debt: $143M

Total Liabilities: $407

The company's cash+A/R+inventory less all liabilities add up to $265 million. Note that this barebones minimal valuation excludes the company's relationships with customers, its manufacturing facilities, and other intangibles which make this a profitable company. Yet as recently as Monday, the company traded with a market cap of just $120 million!

Though we cannot predict which companies will beat/miss analyst expectations by a few pennies, we can still determine which ones have minimal downside and plenty of upside. The AM Castles in this market are a-plenty, for those who are willing to search, analyze, and invest against the prevalent fear that persists in today's market.

Disclosure: Author has a long position in CAS

Saj Karsan

About the author:

Saj Karsan
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.

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