LINAMAR CORP. $25 - Toronto symbol LNR

LINAMAR CORP. $25 (Toronto symbol LNR;Aggressive Growth Portfolio, Manufacturing &Industry sector; Shares outstanding: 64.7 million;Market cap: $1.6 billion; Price-to-sales ratio: 0.5;Dividend yield: 1.3%; TSI Network Rating: Extra Risk; www.linamar.com) gets 85% of its revenue by making engines, transmissions and other precision machined parts for automakers. The company has plants in North America, Europe and Asia.

The remaining 15% of Linamar’s revenue comes from its self-propelled, scissor-type elevating work platforms, which it sells under the Skyjack name,plus consumer products, such as lawn mowers and cargo trailers.

Thanks to rising new car sales, particularly in theU.S., Linamar’s earnings jumped 33.3% in the three months ended September 30, 2012, to $0.52 a sharefrom $0.39 a year earlier.

Overall sales rose 6.6%, to $773.4 million from$725.6 million. Sales at the main Powertrain/Driveline division increased 5.5% thanks to a rise in orders from U.S. car makers and last year’s purchase of three plants in France.

Sales at the Industrial Products division gained14.2% as construction firms continued to replace their older Skyjack platforms. Rising demand for agricultural equipment in Europe also contributed tothe higher sales.

The company aims to launch more new products,including engine parts made from lightweight metals,such as aluminum and magnesium. To that end,it continues to invest heavily in upgrading its plants.That’s why its capital spending rose 11.0% in the first nine months of 2012, to $283.3 million from$255.3 million a year earlier.

Linamar can easily afford these investments. Its long-term debt of $706.9 million is a manageable44% of its market cap. The company also ended the latest quarter with cash of $59.1 million, or $0.91 ashare.

The stock has soared over 65% in the past year.Even so, it still trades at just 11.2 times Linamar’s likely 2012 earnings of $2.24 a share. The $0.32dividend yields 1.3%.

Linamar is a buy.

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