American Railcar Industries, Inc. (ARII)

pencils2 (99.64) Submitted: 4/28/2008 1:12:32 PM : Start Price: $20.60 ARII Score: -28.11

Business: American Railcar Industries, Inc.
Nasdaq: ARII

Designs, manufactures, and markets hopper and tank railcars in North America. The company operates in two segments, Manufacturing and Railcar Services.

Reasons to be interested:

1. As I've mentioned several times before, railroad freight in general has been picking up a lot of steam recently with rising fuel prices and higher costs for the trucking industry. Railroad freight has become an efficient option for freight transit and as a result the industry has been booned with higher margins and a boom of business.

2. The company's cash flow production has been very strong over the past couple years, producing $60.23 million in fiscal 2007 compared to $29.97 million in fiscal 2006. Net income has jumped from $1.52 million ($0.14 per share) in fiscal 2005 to $37.26 million ($1.74 per share) in fiscal 2007. Plus, the company's balance sheet is pretty healthy with $303.88 million in cash and $275 million in debt.

3. Billionaire investor Carl Icahn is the company's largest shareholder and chairman, owning 11,587,945 shares out of a total of 21,300,000 shares. Other executives have much experience with the company and industry as well.

Main risk:

1. The company's cash flow and earnings production only recently have started to become consistent, largely because several years ago the railroad industry was not in good shape. However, if the company's inconsistency was more than a result of industry troubles, it could be difficult to create long-term stability.