Acme United’s Growth Prospects and Q3 Report

Clauss Damascus Knife Set

The new Clauss Damascus knife set is the first Acme United product ever carried by Cabela's.

Acme United (ACU – $9.75) is growing fast internationally. During the third quarter of 2010, European and Canadian sales grew 22% and 9% respectively. In order to continue that growth, the Company is hiring additional sales people in Asia and Europe.

The coming months are very interesting for ACU.

This month and early 2011, a new line of Camillus knives and two complete new lines of Clauss garden tools will enter stores.

Additionally, Acme United is increasing its distribution worldwide. For example, the new Clauss Damascus knife set was first introduced at Cabela’s a few weeks ago. This was the very first Acme United product ever carried by Cabela’s. And the Clauss garden tools will be available, amongst many others, at a new chain.

Oh, and have I already mentioned that Acme has one of the lowest P/E’s in the office products industry, has over $7 million in cash and is paying a 2.5% annual dividend?

Conclusion

Based on this growth potential, we reiterate our buy recommendation and adjust our 12-month price target upwards from $12.15 to $13.04, which is attributable to the average P/E increase for the industry.

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  • When do you see this company returning to a 20% ROE.

    • @bgofcanada,

      Good question, but difficult answer.

      Although Acme United is expanding internationally and bringing new products to the market, I don’t think we’ll see a 20% ROE until the US economy shifts into a higher gear again.

      Let me explain. For the first nine months of fiscal year 2010 about 75% of Acme United’s revenues were derived from domestic sales. This percentage may come down somewhat as ACU is hiring additional sales people both in Europe and Asia to increase its sales efforts over there, but the US will clearly remain the biggest market for ACU.

      A positive outlook is picked up from the office supplies industry, but we’re not there yet. Speaking about the office supplies industry, Acme United still has one of the highest ROE’s in the industry.

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