Acme United Strongly Undervalued Thanks to Outstanding 2018 Growth Prospects

Acme United Corporation (ACU – $21.49) is a worldwide supplier of cutting devices, measuring instruments and first-aid products for school, home, office, industrial and hardware use.

Acme United started off 2018 very strong. During the first quarter, ended March 31, 2018, the Company achieved sales of $31.7 million, compared to $27.7 million in the first quarter of 2017, an increase of no less than 14%. Net income was $765,000 or $0.21 per diluted share, for Q1 2018, compared to $695,000 or $0.18 per diluted share for the comparable period last year, an increase of 16% in net income and 17% in earnings per share. Both sales and earnings set a new first quarter record.

The first aid and safety business saw strong growth. The Westcott brand was also a solid contributor to the first quarter results, and the Clauss, Camillus and Cuda product lines all recorded record sales.
Acme United is clearly back on track and has paved the way for an outstanding 2018. Walter Johnsen, the Chairman and CEO of Acme United, provided guidance for 2018 of approximately $140 million in revenues, $5.7 million in net income, and $1.53 earnings per share. While conservative, these numbers imply solid growth over last year!

Online sales continue to boost Acme’s sales and earnings. In particular, the first aid area and the Westcott business are performing strong online. This is expected to continue in 2018, as increased online demand is foreseen in both the United States and Europe.

Growth in margins in very significant as it reflects successful management of ecommerce warehousing and shipping. Acme United has done an outstanding job to swiftly correct the issues at its warehouse. It increased the accuracy of product dimensions and weight, and moved fast moving items closer to the shipping location. In addition, Acme started shipping its packages with US Postal, a low-cost shipper. All of this was reflected in distribution and warehouse costs that were under control.

Based on our outlook and calculations, we reiterate our buy recommendation for Acme United Corp. with a price target of $29.57, which is 38% above today’s stock price.

Smallcaps.us Advice: Buy	Price Target: $59.86	Latest Company Report (pdf)
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