Acme United Corporation (ACU – $27.21) is a worldwide supplier of cutting devices, measuring instruments and first-aid products for school, home, office, industrial and hardware use.
Acme United is executing its growth plans in an excellent manner. First quarter sales grew by 10 percent and earnings even by 17 percent, thanks to both organic and external growth. The outlook for 2017 is bright and the Company seems to be well on its way for another record year.
Walter C. Johnsen, the Chairman and CEO of Acme United, reiterated the guidance for 2017 of approximately $137 million in sales (+10% vs 2016), net income of $6.7 million (+14.5% vs 2016), and $1.76 earnings per share (+7.3% vs 2016). In addition, Mr. Johnsen recently said at the Disruptive Growth & Healthcare Conference in New York that $160 million in sales could be achievable in 2018 with a small acquisition.
Part of that growth will be derived from the recently acquired Spill Magic Inc. The cutting edge manufacturer of absorbents, had revenues in 2016 of $6.3 million and EBITDA of approximately $1.4 million, making it accretive from day one. In the first quarter it already contributed $1.1 million in sales.
Acme United is one of those companies that you don’t come across often. Although it operates in mature industries that don’t grow much, it’s able to gain market share through relentless innovation.
Consequently, loyal shareholders have been rewarded plentifully. Since 2012, Acme’s stock price has gone up a whopping 173%, excluding all dividends. This is a compounded growth rate of more than 20%!
To put that in perspective, since 2012, the Dow Jones has gone up 66%, NASDAQ has risen 133% and the Russell 2000 Index – the so-called small cap index, although it contains some companies with a market cap of more than $1 billion – is up 75%. All in all, nowhere near Acme’s return.
Based on our outlook and calculations, we reiterate our buy recommendation for Acme United Corp. with a price target of $36.20, which is 33% above today’s stock price.
|Download the first quarter 2017 Acme United Company Report.|
|Smallcaps.us Advice: Buy||Price Target: $30.25||Latest Company Report (pdf)|
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