NGA – Initiation of Buy Recommendation

By: ispeculatornew
Date posted: 07.09.2007 (12:00 am) | Write a Comment  (0 Comments)

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NGA – North American Galvanizing & Coatings (American Stock Exchange) (Closing Price – $8.36)

North American Galvanizing & Coatings (NGA) is a company with solid fundamentals and increasing earnings. However, the share price has had quite a run in the last few months and share price can be volatile so NGA is a speculative stock pick.

North American Galvanizing provides hot dip galvanizing for corrosion protection of fabricated steel products in the United States. The company has benefited from strong demand for hot dip galvanizing and increases in zinc prices the last few years.

NGA’s revenues have increased the last seven quarters (maybe more, I only checked the last seven) and the company has posted earnings (pre-split) of 0.18 (Q2 06), 0.14 (Q3 06), 0.12 (Q4 06), and 0.28 (Q1 07) the last four quarters. Last quarter NGA had a huge jump in earnings as the company was able to increase its average selling prices above zinc cost increases.

The stock price made huge gains after last quarter’s earnings release but it has sold off since then and I think now is a good time to get in.

One of NGA’s competitors AZZ incorporated released its Q1 results on 6/29 and reported sequential increases in revenue and operating income for its galvanizing services. This bodes well for another strong quarter from NGA.

If NGA can improve upon its impressive results last quarter I think the stock price will make another big jump.

NGA’s trailing PE is 17.4 at today’s closing price so even after the big increase in share price last quarter NGA is trading at a nice valuation.

As I mentioned before the share price of NGA can be volatile so I would recommend using limit orders if you decide to buy NGA.

I am going to initiate a buy recommendation at today’s closing price.

Disclosure: I currently own shares of NGA.

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