2024-02-01 06:14:54 ET
Summary
- Core Molding Technologies' revenue and earnings have doubled in the past decade. But this growth rate is not sustainable as it was due to extraordinary price spikes over the past 3 years.
- The company operates in a cyclical market and has a significant reliance on its top 5 customers, although this risk has been decreasing over time.
- Despite being financially strong, CMT's performance gap and lack of margin of safety make it not an investment opportunity.
Investment Thesis
Over the past decade, Core Molding Technologies' (CMT) revenue and earnings more than doubled. However, this growth rate is not sustainable. While the average thermoplastic price over the past 3 years was about 1/3 higher than the average 2014 to 2016 price, current prices seem to have come down to the 2014 level.
From a profitability and operating efficiency perspective, there was no significant improvement over the past decade. But it is financially strong so there is a performance gap....
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Core Molding Technologies: Outlier Product Prices Painted A Misleading Performance