Acme United Corporation (ACU – $22.30) is a worldwide supplier of cutting devices, measuring instruments and first-aid products for school, home, office, industrial and hardware use.
Acme’s online sales are growing very rapidly, particularly at Amazon, and also at Jet, which is part of Walmart. The Company has a team working exclusively on online content, reviews, and search optimization. This is paying off. In particular, the first aid area and the Westcott business are performing strong online.
However, Acme faces several challenges with online growth. One of them is to maintain, or even grow, its market shares across all major product lines, while the shift from retail stores to online is in full force. Acme is succeeding very well in this endeavour, while many others are struggling.
Overall, the business in the fourth quarter looks good, with forecasted growth for Camillus, Cuda, and Westcott. Also the first aid business continues to do very well. For example, a major new contract for SmartCompliance cabinets was recently landed.
Acme’s strategy to refill these kits through the internet is contrary to service people in delivery vans who will typically go into different locations to fill the first aid kits and then come back on a regular basis. The latter is obviously a time consuming and very expensive model, as the cost of the individual sales staff, the truck, the employee, and benefits have to be taken into account. Consequently, Acme United is clearly gaining share in this $600 million market segment.
In addition, the Company has recently doubled the productive capacity at DMT. The brand is growing in the United States and in Europe. And it has simplified production at Spill Magic, which increased the output.
Acme expects to achieve its seventh consecutive year of record sales in 2017.
As for 2018, Acme United has already secured $8 million worth in new business in first aid, pencil sharpeners, paper trimmers and Camillus knives. Moreover, the acquisition of the First Aid Only facility will be a significant cost saver. The Company also continues to look to acquire undervalued assets and attractive companies.
Based on our outlook and calculations, we reiterate our buy recommendation for Acme United Corp. with a price target of $30.25, which is 35% above today’s stock price.
|Download the third quarter 2017 Acme United Company Report.|
|Smallcaps.us Advice: Buy||Price Target: $30.25||Latest Company Report (pdf)|
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