LINAMAR CORP. $33 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $2.1 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.0%; TSINetwork Rating: Extra Risk; www.linamar.com) gets 80% of its revenue by making engines, transmissions and other precisionmachined parts for automakers. The company has plants in North America, Europe and Asia.
The remaining 20% 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.
The company continues to benefit from strong car sales. Rising construction activity has also prompted contractors to replace their older Skyjack platforms.
In addition, Linamar continues to expand in Asia. It recently won a $20-million-a-year contract to supply camshafts to a Japanese carmaker.
The company now gets 64% of its revenue from Canada, 15% from Europe, 10% from the U.S., 8% from Mexico and 3% from Asia.
In the three months ended June 30, 2013, Linamar’s revenue rose 9.0%, to $929.4 million from $852.3 million a year earlier. Sales of transmissions and other automotive components rose 6.1%, while industrial equipment sales gained 23.1%.
Earnings jumped 44.2%, to $60.7 million, or $0.94 a share. A year earlier, it earned $42.1 million, or $0.65. Linamar’s profits benefited from the higher revenue and savings from an ongoing plan to improve the company’s productivity.
Linamar’s sound balance sheet will help it keep expanding overseas. The company’s long-term debt of $688.1 million is a manageable 33% of its market cap. It also holds cash of $97.2 million, or $1.50 a share.
The company should earn $3.05 a share in 2013, and the stock trades at just 10.8 times that forecast. The $0.32 dividend yields 1.0%.
Linamar is a buy.
