|Written by GSCR Staff
|Thursday, 30 January 2014 09:52
In Monday’s Goldman Guide we mentioned that there were two important reports coming out this week that will give some idea of where the economy is going. The Consumer Confidence Index came out Tuesday and the news was encouraging. The index increased to 80.7 for this month marking the second straight month of an upward trend. On Friday, the University of Michigan’s Consumer Sentiment Index is released as well and an uptick would be welcome news for anxious investors. A play on select beaten-down, consumer discretionary and other retail related stocks might be in order.
Libbey Inc. (NYSE – LBY - $20.77) is a solid play on an increase in consumer discretionary spending in our small cap world. The glass tableware product manufacturer is headquartered in Toledo, Ohio and has been around since 1818. Not much cache here. So in this ultra hype Super Bowl week with multi-million dollar ad campaigns the pick may not have sex appeal, but the brand is solid and the Company appears poised to meet the pent up demand that may be unleashed as the economy continues to improve.
Libbey has a variety of products that consumers will look to purchase as they re-vamp their kitchenware after several years of keeping that old ‘stuff’ around. The Company offers glass tableware products, including tumblers, stemware, mugs, bowls, vases, salt and pepper shakers, shot glasses, canisters, candleholders, and various other items; glass bakeware; handmade glass tableware; and other glass products for original equipment manufacturers, such as blender jars and washing machine windows. Libbey also offers higher end stemware, glassware, crystal, and China. The Company’s distribution channel includes foodservice distributors, mass merchants, department stores, retail distributors, national retail chains, specialty housewares stores, candle and food packers, decorators, breweries, distilleries, craft industries, gourmet food-packing companies, and floral companies.
LBY appears very strong from a basic valuation perspective. The forward 12-month P/E of 9 is less than half the forward P/E of 21 as the consensus revenue forecast for 2014 is expected to grow 2.5% to $840 million. A current ratio of 1.87 indicates the Company has plenty of cash on hand to expand this year as well. Moreover, the Company is set to release its 4Q13 results tomorrow, so the combination of good results and a solid survey numbr could drive the shares higher.
We like LBY as a solid play with limited downside on an increase in consumer discretionary spending in 2014. A 25% increase in price is within reach sometime in 3Q14.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com