Acme United Stock Hits New All-Time High

Acme United’s (ACU – $23.19) stock reached $24.09 on Tuesday, setting a new record high. The innovative supplier of cutting devices, measuring instruments, and first aid products, announced a 10 cent quarterly dividend this week.

More importantly though, the Company has constantly grown its sales and earnings the past several years. This is being rewarded by shareholders that want a piece of just 3.64 million shares outstanding.

Acme’s Chairman and CEO Walter C. Johnsen recently increased the Company’s sales and earnings guidance for 2016. Thanks to an outstanding performance of all its brands in the first nine months of the year, the Company now expects to generate revenues of $124 million and earnings per share of $1.63 in fiscal year 2016. Again two records in its history.

Meanwhile, new products are constantly being introduced, which lays the groundwork for further growth in 2017. Consequently, Mr. Johnsen expects a continued strong performance going forward!

Impressive Performance

During the past year, Acme’s stock price has gone up over 42%. But the performance of the Company’s stock is even more impressive over a five year period. Since late 2011, the stock has risen a whopping 153.5%, excluding all dividends. This is a compounded growth rate of 20.45% over a five year period!

To put that in perspective, let’s compare that number with the performance of three major indexes that are all over the news and are praised for their excellent returns.

Stock/Index
Price
Late 2011
Price
Late 2016
Return %
Acme United $9.50 $24.09 153
Dow Jones 12,294 19,918 62
NASDAQ 2,618 5,447 108
Russell 2000 748 1,362 82
Performance comparison between Acme United and three major US indexes

Since late 2011, the Dow Jones has gone up 62%, NASDAQ has risen 108% 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 82%. All in all, nowhere near Acme’s return.

Too Late?

Is it too late to get on board and become a shareholder of Acme United? Most certainly not. The Company has tons of new products lined up that will enter stores in 2017.

Westcott, for instances, is offering new school, home and office products, such as glue guns with ceramic coatings that are ideally suited for the craft, office and shipping work places. It has new heavy duty pencil sharpeners with proprietary titanium blades for the school market and it’s expanding the line of ceramic box cutters for heavier duty use.

Moreover, the first aid division recently introduced an app, which allows customers to reorder first aid supplies in a quick, convenient and user-friendly matter. It received lots of positive responses at the National Safety Council Show, where it was first shown to the public.

Clauss, Cuda, Camillus and DMT products will continue to benefit from expanded distribution in the mass market and specialty stores. For Cuda, new freshwater fishing tools will be launched and several product line extensions, such as carbon fiber gaffs and nets, will be introduced.

On top of all that, Mr. Johnsen indicated a few weeks ago that the Company will be looking for more accretive acquisition candidates in the new year.

Conclusion

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. The blades on many of the Company’s products have a proprietary coating, making them more durable, rust resistant or non-stick. Some school and office products have Microban antimicrobial protection to prevent the growth of bacteria on the surface. And all products have an attractive design, making sure that they stand out in stores.

The Company continues to execute very well. Distribution is gained both online and off, gross margins were above 35% in the first nine months of 2016, and the balance sheet is very healthy.

Finally, Acme United’s growth story is supported by a 10 cents quarterly dividend. The next dividend is payable on January 27, 2017 to stockholders of record on the close of business on January 6, 2017. Buy recommendation.

Smallcaps.us Advice: BuyPrice Target: $36.38Latest Company Report (pdf)
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