Bucyrus International, Inc. (NASDAQ:BUCY.DL)

TSIF (99.95) Submitted: 10/2/2009 2:03:18 PM : Start Price: $32.81 BUCY.DL Score: +41.17

Bucyrus International, a supplier of underground and above ground mining equipment and repair parts is not an obivous pick in a recession. This is exactly the reason that I feel that it is currently undervalued and that Bucyrus has very good potential as the economy stengthens and decent potential even if the economy lags slower than the "green shootists" believe. Spikes in gold prices are also causing investors to think of secondary plays. Throughout the recession, Bucyrus has continued to increase revenue and hold margins. It's competitor JoyG is better known in this area of machinery. Bucyrus, however, unlike it's peers, has consistantly increased revenue. Currently P/S is sub 1, P/B 2, profit margins 10%, operating margins of 16%. ROA/ROE well above average. Debt is high in comparison to cash, but holding and servicing it is a fraction of revenues. Looking ahead, Bucyrus is honest that orders for subsurface equipment (i.e. coal) have been cancelled or deferred out a quarter, but they are still holding a backlog. Orders for surface equipment and repair parts for both are up and making up for the decline in subsurface equipment orders. Mining equipment needs to run 24x7. You might defer buying new, but you won't defer whatever it takes to keep it running. Broken equipment means idle mines, idle works, and losses that cannot be made up later. Finanlly, with the price of metals, gold, copper, etc, returning to normal, (or spiking above normal), mines will be encouraged to add equipment to ramp prduction. Given the current economic state and Bucyrus' affinity for blooming even in a coal mine, they get a big green thumbs up from me.