$LYTS - LSI Industries Inc. - Ever Been to a Gas Station - Bullish
What do they do
- Based in Cleveland, OH, LSI makes industrial and outdoor lighting systems and accessories. These systems include gas station lighting and display/control systems (touch screens); outdoor sports lighting; and retail lighting systems.
- All products are made in the US which is an important moat for those sectors that require a Made in America designation such as federal contracts.
- The company was founded in 1976 and has grown through acquisitions to offer a broad and complete range of products and services for illumination and branding. As infrastructure spending increases and new developments flourish, both direct uses in retail and sports spaces and ancillary uses in gas stations/road stops will bolster LSI’s business.
Why is it a good company
- Improved margins last four quarters
- Doubled ROA and ROE YoY
- High OCF to Earnings ratio; real cash, not accounting
- Earnings growth QoQ; 100% increase YoY
- Decreased debt last eight quarters; debt coverage increased YoY
- Book equity has increased eight straight quarters.
- Enterprise value is less than the market cap
Why is it a good stock
- Greater than 90% free float; largest owner at ~8.5%
- Second quartile for momentum/price change: it’s rising but not topping at the moment
- Higher div yield than peers; in line with SPY
- 3 year smoothed FCF yield is 11.5% > WACC: good value looking at a longer time horizon
- P/B lower than peers with better fundamental improvement compared to peers
What now
- Long $LYTS with a PT of 12.5; EV/FCF based at 16x T12 FCF
- Write July calls at 12.50, IV = 48% on the bid
What are you not telling me
- Pretty low volume: 90 day average = 106k
- New management in the last 3 years might not have navigated the company through a full market cycle
- A slow down in infrastructure spending would negatively impact their profitability
Data from company website, Refinitiv, and Yahoo! Finance
Submitted March 12, 2021 at 11:52PM by Capn-Stabn https://ift.tt/38AXgmW
