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$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
When I was in kindergarten, I used to spend a great deal of time and effort on the projects put forth so that I could do a good job and be commended by my teacher, Mrs. Sweeney. At the end of the day, I would gather up the fruits of my labor and walk down Weld Street – looking forward to some leftover lamejun and labne to eat before dinner and also presenting my masterpiece to my mother so she could admire it in front of me.
Of course, the best laid plans don’t always come to fruition. There was a little Italian girl in my class named Nina. For some reason, almost every day after school Nina used to grab my papers and run to her house, hoping that I would chase her. That wasn’t much fun. First of all, I was a fat kid. Second I had these Armenian shoes which were not well equipped for distance running. Third, she was a lot faster than I was. Inevitably, I would get to Nina’s house and her mother would ask me inside, but – all sweaty, flustered and sometimes crying, I would decline and ask for my papers back. That’s really all I have to say about Nina. So Nina, if you’re still out there, I hope you found a guy who liked you more than he liked his kindergarten projects.
Actually, I did find a Nina I liked. It’s Neenah Paper, Inc. (NP). Today I bought stock in Neenah at 52.72. I will sell it in 4 to 6 weeks at 60.72. Here’s why I like Neenah:
Just like every stock I ever buy, it starts with the chart:
NP is up 68% over the last 52 weeks, yet its PE is only around 16. What’s even better, is this stock pays a steady 1.9% dividend. They also look forward to opportunistic share buybacks. The stock is cheap, yet it is a tremendous growth stock opportunity. Can’t lose…CAN’T LOSE! A bunch of other paper companies are trading at much higher PE multiples.
Neenah Paper, Inc. produces and sells technical products and fine papers worldwide. The company’s Technical Products segment provides filtration media for automotive transportation; saturated and unsaturated crepe and flat paper tapes to manufacturers; lightweight abrasive paper for waterproof and dry sanding; wall covering substrates to converters serving commercial and consumer-do-it-yourself markets; label and tag products to pressure sensitive coaters; latex saturated and coated papers; premask, medical packaging, image transfer, and decorative components papers; and clean room papers, durable printing papers, release papers, and furniture backers. Its Fine Paper segment manufactures and sells writing papers used for business and personal stationery, corporate identity packages, and related end-use applications; text and cover papers, and envelopes used in corporate brochures, pocket folders, corporate annual reports, advertising inserts, direct mail, business cards, hang tags, scrapbooks, and other uses; custom colors, paper finishes, and duplex/laminated papers; and bright papers used in direct mail, advertising inserts, scrapbooks, and marketing collateral applications.
I didn’t like Nina taking my papers, but I really like Neenah Paper. Market sentiments are favoring Neenah Paper—as evidenced by the increase in share price—since the company released its fourth-quarter 2013 results on Feb 18. Earnings per share from continuing operations in the quarter were 78 cents, surpassing the ANAL-ysts Estimate of 56 cents by 39.3%. Also, the net result was above the year-over-year earnings per share of 60 cents. Revenues in the quarter increased 6% year over year to $204.9 million. The improvement was driven by 4.1% and 9.8% revenue growth recorded in the Technical Products and Fine Paper segments respectively. Gross margin increased 100 basis points year over year to 20.6%. Neenah Paper also remains focused on rewarding its shareholders well through dividend payments. The company has increased its quarterly dividend rate for first-quarter 2014 by 20% to 24 cents from the earlier 20 cents.
Fourth-quarter 2013 results as well as the increased dividend rate triggered upward revisions in earnings estimates for Neenah Paper. In the last 60 days, the ANAL-ysts have increased their estimates to $3.21 for 2014 and $3.56 for 2015.
Operational synergies from the acquired Southworth brands helped Neenah Paper to succeed in its go-to-market strategy as well as drive higher-value price and mix. Despite higher pulp prices, the company’s manufacturing efficiencies and improved productivity have ensured sustainable margin expansion. While focusing on its core areas of expertise, Neenah Paper is also striving to diversify its product portfolio in order to drive further growth.
Neenah Paper looks well positioned to capitalize on opportunities in growing markets through both organic and inorganic means. With a strong balance sheet, healthy cash flow and effective management, the company appears poised to exploit value-added opportunities to bolster its prospects.
What’s so sexy about paper? Neenah actually is involved in more than just paper. And then there was Jimmy Two Times, who got that nickname because he said everything twice, like: “I'm gonna go get the papers, get the papers.” The technical products business deals with specialty, performance-based products and serves end markets such as filtration, industrial backings, labels, and other specialties. This is a high margin business with barriers to entry which won’t go away.
The filtration business is expected to grow 2x GDP. Neenah has solidified their position with their ability to meet specialized performance requirements and knowledge through customer intimacy and qualification which will lead to the innovative next generation products. Neenah is the leader in the European market and is growing this business at CAGR 8% over the last 10 years. While Neenah dominates in Europe, they have yet to scratch the surface in Asia and NAFTA where the markets are much bigger. Here’s the big news. They are getting into the beverage filters (think Keurig coffee….mmmm I love coffees). Overall the specialty filtration market is over $4 billion. Lots of growth to be had.
The fine paper business has specialty products for image oriented high end textured and colored graphics papers. This is the high margin stuff with consistent and attractive profits , not the cardboard boxes. This division has shown 3 years of top-line growth, boosted by brand acquisitions and double digit gains in luxury packaging and premium labeling. Neenah has 60% of the market share for premium papers. With Mohawk Paper the next biggest at 30%. They are kicking azzzz!
The global market for luxury packaging and labels is over $2 billion and growing up to 5% per year. Neenah already distributes their products through the big boxes (Walmart, Staples, Amazon, etc).
What’s the big picture love for Neenah? Simple:
1. Leading positions in specialized markets with barriers to entry
2. Attractive returns driven by profitable core business, organic growth, events and cash return to shareholders
3. Strategic focus on expansion in defensible and growing specialty markets, further from historical "pulp & paper" positioning
4. Momentum in sales and profits reflecting successful execution of plans
5. Sound capital structure and financial flexibility
6. Sustainable, strong cash flow generation and returns
Neenah is planning on expanding into new geographies to grow their margins. They also have some acquisitions in their sites that will deliver accretive value and expend their presence in the growing specialty markets. Neenah has been a money machine with a Return on Equity of 21.3% vs the peer average of 5%. Their balance sheet has ample flexibility and borrowing capacity. They have reduced the interest on their outstanding bond from 7.375% to 5.25%...that alone pays for their dividend! They are spinning off $60 million of free cash flow which they could use for dividend growth or share repurchase – both of which will help the stock. Approximately 50% of senior management pay is equity based, so you better believe they want this stock to keep going up.
So it’s easy to see where they’ve been with their earnings, but where are they going. Like I said earlier, the ANAL-ysts project 2014 earnings of $3.21/share on revenues of $878 million. That’s just silly. We are going to see accelerated top line growth via share gains, new products, price/mix and acquisitions. We’ll also see bottom line growth via margin improvement and debt reduction. Remember, if Janet Yellen keeps yelling and interest rates creep up, an inflationary environment would really help this company. $$$MR. MARKET$$$ projects that 2014 revenues will come in at $943 million, which will generate earnings of $3.58/share. Given the existing PE of 16.5, that projects out to a share price of:
16.5 x $3.58 = 59.07 which is about what my target price is saying.
My guess is that with this stock pick, the only papers I am going to be running around with will have pictures of Ben Franklin on them. Just lovely.
I am HUGE!
$$$MR. MARKET$$$
$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
When I was in kindergarten, I used to spend a great deal of time and effort on the projects put forth so that I could do a good job and be commended by my teacher, Mrs. Sweeney. At the end of the day, I would gather up the fruits of my labor and walk down Weld Street – looking forward to some leftover lamejun and labne to eat before dinner and also presenting my masterpiece to my mother so she could admire it in front of me.
Of course, the best laid plans don’t always come to fruition. There was a little Italian girl in my class named Nina. For some reason, almost every day after school Nina used to grab my papers and run to her house, hoping that I would chase her. That wasn’t much fun. First of all, I was a fat kid. Second I had these Armenian shoes which were not well equipped for distance running. Third, she was a lot faster than I was. Inevitably, I would get to Nina’s house and her mother would ask me inside, but – all sweaty, flustered and sometimes crying, I would decline and ask for my papers back. That’s really all I have to say about Nina. So Nina, if you’re still out there, I hope you found a guy who liked you more than he liked his kindergarten projects.
Actually, I did find a Nina I liked. It’s Neenah Paper, Inc. (NP). Today I bought stock in Neenah at 52.72. I will sell it in 4 to 6 weeks at 60.72. Here’s why I like Neenah:
Just like every stock I ever buy, it starts with the chart:
NP is up 68% over the last 52 weeks, yet its PE is only around 16. What’s even better, is this stock pays a steady 1.9% dividend. They also look forward to opportunistic share buybacks. The stock is cheap, yet it is a tremendous growth stock opportunity. Can’t lose…CAN’T LOSE! A bunch of other paper companies are trading at much higher PE multiples.
Neenah Paper, Inc. produces and sells technical products and fine papers worldwide. The company’s Technical Products segment provides filtration media for automotive transportation; saturated and unsaturated crepe and flat paper tapes to manufacturers; lightweight abrasive paper for waterproof and dry sanding; wall covering substrates to converters serving commercial and consumer-do-it-yourself markets; label and tag products to pressure sensitive coaters; latex saturated and coated papers; premask, medical packaging, image transfer, and decorative components papers; and clean room papers, durable printing papers, release papers, and furniture backers. Its Fine Paper segment manufactures and sells writing papers used for business and personal stationery, corporate identity packages, and related end-use applications; text and cover papers, and envelopes used in corporate brochures, pocket folders, corporate annual reports, advertising inserts, direct mail, business cards, hang tags, scrapbooks, and other uses; custom colors, paper finishes, and duplex/laminated papers; and bright papers used in direct mail, advertising inserts, scrapbooks, and marketing collateral applications.
I didn’t like Nina taking my papers, but I really like Neenah Paper. Market sentiments are favoring Neenah Paper—as evidenced by the increase in share price—since the company released its fourth-quarter 2013 results on Feb 18. Earnings per share from continuing operations in the quarter were 78 cents, surpassing the ANAL-ysts Estimate of 56 cents by 39.3%. Also, the net result was above the year-over-year earnings per share of 60 cents. Revenues in the quarter increased 6% year over year to $204.9 million. The improvement was driven by 4.1% and 9.8% revenue growth recorded in the Technical Products and Fine Paper segments respectively. Gross margin increased 100 basis points year over year to 20.6%. Neenah Paper also remains focused on rewarding its shareholders well through dividend payments. The company has increased its quarterly dividend rate for first-quarter 2014 by 20% to 24 cents from the earlier 20 cents.
Fourth-quarter 2013 results as well as the increased dividend rate triggered upward revisions in earnings estimates for Neenah Paper. In the last 60 days, the ANAL-ysts have increased their estimates to $3.21 for 2014 and $3.56 for 2015.
Operational synergies from the acquired Southworth brands helped Neenah Paper to succeed in its go-to-market strategy as well as drive higher-value price and mix. Despite higher pulp prices, the company’s manufacturing efficiencies and improved productivity have ensured sustainable margin expansion. While focusing on its core areas of expertise, Neenah Paper is also striving to diversify its product portfolio in order to drive further growth.
Neenah Paper looks well positioned to capitalize on opportunities in growing markets through both organic and inorganic means. With a strong balance sheet, healthy cash flow and effective management, the company appears poised to exploit value-added opportunities to bolster its prospects.
What’s so sexy about paper? Neenah actually is involved in more than just paper. And then there was Jimmy Two Times, who got that nickname because he said everything twice, like: “I'm gonna go get the papers, get the papers.” The technical products business deals with specialty, performance-based products and serves end markets such as filtration, industrial backings, labels, and other specialties. This is a high margin business with barriers to entry which won’t go away.
The filtration business is expected to grow 2x GDP. Neenah has solidified their position with their ability to meet specialized performance requirements and knowledge through customer intimacy and qualification which will lead to the innovative next generation products. Neenah is the leader in the European market and is growing this business at CAGR 8% over the last 10 years. While Neenah dominates in Europe, they have yet to scratch the surface in Asia and NAFTA where the markets are much bigger. Here’s the big news. They are getting into the beverage filters (think Keurig coffee….mmmm I love coffees). Overall the specialty filtration market is over $4 billion. Lots of growth to be had.
The fine paper business has specialty products for image oriented high end textured and colored graphics papers. This is the high margin stuff with consistent and attractive profits , not the cardboard boxes. This division has shown 3 years of top-line growth, boosted by brand acquisitions and double digit gains in luxury packaging and premium labeling. Neenah has 60% of the market share for premium papers. With Mohawk Paper the next biggest at 30%. They are kicking azzzz!
The global market for luxury packaging and labels is over $2 billion and growing up to 5% per year. Neenah already distributes their products through the big boxes (Walmart, Staples, Amazon, etc).
What’s the big picture love for Neenah? Simple:
1. Leading positions in specialized markets with barriers to entry
2. Attractive returns driven by profitable core business, organic growth, events and cash return to shareholders
3. Strategic focus on expansion in defensible and growing specialty markets, further from historical "pulp & paper" positioning
4. Momentum in sales and profits reflecting successful execution of plans
5. Sound capital structure and financial flexibility
6. Sustainable, strong cash flow generation and returns
Neenah is planning on expanding into new geographies to grow their margins. They also have some acquisitions in their sites that will deliver accretive value and expend their presence in the growing specialty markets. Neenah has been a money machine with a Return on Equity of 21.3% vs the peer average of 5%. Their balance sheet has ample flexibility and borrowing capacity. They have reduced the interest on their outstanding bond from 7.375% to 5.25%...that alone pays for their dividend! They are spinning off $60 million of free cash flow which they could use for dividend growth or share repurchase – both of which will help the stock. Approximately 50% of senior management pay is equity based, so you better believe they want this stock to keep going up.
So it’s easy to see where they’ve been with their earnings, but where are they going. Like I said earlier, the ANAL-ysts project 2014 earnings of $3.21/share on revenues of $878 million. That’s just silly. We are going to see accelerated top line growth via share gains, new products, price/mix and acquisitions. We’ll also see bottom line growth via margin improvement and debt reduction. Remember, if Janet Yellen keeps yelling and interest rates creep up, an inflationary environment would really help this company. $$$MR. MARKET$$$ projects that 2014 revenues will come in at $943 million, which will generate earnings of $3.58/share. Given the existing PE of 16.5, that projects out to a share price of:
16.5 x $3.58 = 59.07 which is about what my target price is saying.
My guess is that with this stock pick, the only papers I am going to be running around with will have pictures of Ben Franklin on them. Just lovely.
I am HUGE!
$$$MR. MARKET$$$
$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
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