PebbledsPicks (90.82)

September 2009: Spartan Motors Inc. (SPAR)

September 30, 2009 – Comments (1) | RELATED TICKERS: SPAR

Spartan Motors, Inc. engages in designing, engineering, and manufacturing custom motor vehicle chassis and bodies. It operates two segments, Spartan Chassis and Emergency Vehicle Team. The Spartan Chassis segment engineers, manufactures, and markets chassis for fire trucks, motorhomes, and specialty applications, such as military vehicles, trolleys, utility trucks, and crash-rescue vehicles. It markets its products through the direct contact of its sales department with original equipment manufacturers, dealers, and end users in the United States and Canada. The Emergency Vehicle Team engineers and manufactures emergency vehicles built on chassis platforms and aerial ladder components for fire trucks. Its products include pumpers and aerial fire apparatus, heavy- and light-duty rescue units, tankers, and quick attack units, as well as advanced-care ambulances and rescue vehicles. The company was founded in 1975 and is headquartered in Charlotte, Michigan.

Comments: Here's another cyclical looking to rebound big ... I hope.  So, what's to love in this manufacturer of vehicle parts?  Tons.  Spartan has been profitable for many years, consistently pays a dividend, which it can afford, has excellent, long-term relationships with major clients (though loss of one or more of these deals could be nasty), and Spartan has a squeaky clean balance sheet.  Now some numbers (millions):

                       2008   2007   2006   2005   2004   2003   2002   2001   2000
Revenue            844    682     445     343     312     237     260     226    251
Net Income       42.7    24.5    6.8    8.29     5.88    4.44   11.4     6.02   4.91
Cash Flow        48.8    28.6   19.7   10.9     8.19     6.46   13.3     8.22   7.15

So, at the current market cap of $173 million, SPAR trades at about 4x FCF, 20% of peak revenue (just last year), still maintains about 5% profit margin in these rough times.  Yes, revenues are taking a beating, but they ain't going to zero.  Spartan grew revenues by an average of 18% a year for the last eight years.  Yes, this is a growth company, folks.  Cyclical, yes, but still growing.  The company trades just below liquidation value.

New orders due to the new emission standards may prove to be more than the market appears to be expecting according to the stock price. The stock has had a huge run from the March lows, like so many others, but it has taken a beating over the summer. Teechnically, it appears $5 is pretty solid support unless something drastic happens.  All in all, I like what I see.  I like the margin of safety, and I plan on selling this one for at least a 50% gain in the next year, which should trounce the market.