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Multi-Color (LABL) - Talk about a boring company

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January 21, 2014 – Comments (2) | RELATED TICKERS: LABL

 It might be a bad sign for my social life that I get excited when I find a boring business. Nonetheless, I came across Multi-Color (LABL) today, and boy is this one a zinger. This $590 million company literally prints labels. Since 1916. Over the past two years the company engaged in a string of acquisitions, further expanding Multi-Color's labeling presence into Scotland, Switzerland, Mexico, the U.K., and other countries.

The company's markets include labeling solutions for products in home and personal care, wine and spirit, food and beverage, and other specialty consumer products in the U.S., Canada, Asia, Europe, and a host of other countries as I mentioned above. The company's operations encompass pressure sensitive labels, in-mold labels, and glue-applied labels. Multi-Color produces labels for Coca Cola Brazil and other major brands around the world. My research into the company is just beginning, but this gives you a basic idea of the company's operations and clients in a global context. 

Insiders own 24% of all shares outstanding. CEO Nigel Vinecombe -- who has been with the company since 2008 -- is the largest insider shareholder, owning 3.7% of the company. 

In the most recent quarter, sales only expanded 4% year-over-year. TTM revenue stands at $668.41 million. However, earnings expanded 30.5% year-over-year; TTM net income is $31.32 million. Between fiscal 2009 and fiscal 2012 Multi-Color expanded revenue 238%. Cash flow production has more than doubled over that period to $77.53 million over the past four quarters. 

The balance sheet is rough -- $21.28 million in cash with a hefty chunk of $394.38 million in debt. Still, the company's growth has been pretty impressive up to this point. Free cash flow has been consistently positive over the past few years, so I don't have many doubts about the company's ability to manage its load of debt. 

Currently the stock trades at a P/E of 19. Only three analysts follow the stock, and they expect Multi-Color to expand earnings at 13.5% annually for the next five years. To me this looks like a conservative estimate considering the company grew earnings 19% annually over the past five years. 

Multi-Color has no major competition that I know of, but I will need to research the company quite a bit more before I consider investing any of my own money. The company was too boringly appealing for me to pass up. I'll keep Multi-Color on my watchlist -- at this point a CAPS pick is probably as far as I'd go until I learn more about the company. 

Multi-Color's high level of insider ownership, expanding global presence with a niche (and important) product, and steady growth make it a business worth watching. The fact that the company is flying below the market's radar doesn't hurt either. 

Next time you're looking to spice up your social life, start by researching a labeling business. 

Best,
David K

2 Comments – Post Your Own

#1) On January 23, 2014 at 12:48 PM, chk999 (99.97) wrote:

Nice find!

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#2) On February 13, 2014 at 2:39 PM, Har1en (99.20) wrote:

Nice to hear you're looking into this one as well. I actually bought a small portion for my portfolio, to commit to learning more. I've tracked them on CAPS for a while (should have bought at that time).

 They are so boring, they're sexy. It's interesting they don't make containers (so far as I know) but make the labels for them, which seems like a more high-touch business with greater opportunity to build a moat. Service becomes very important, because the quality of the labels, the quality of the image printed on them, are all require human and technological expertise that is not easy to replicate (in my opinion).

Har1en

 (I work for Wells Fargo, but my opinions are my own, not that of my employer.)

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