Miller Industries, Inc. (MLR)

This is a well managed company on the move. Under $10.00 to me seems like a good deal. With the current economy, the only people buying new vehicles are the "cash for clunkers" guys; However, the people that need new vehicles can't even afford that deal. As a result, there will be a lot more older vehicles on the road and more of a need for the towing business. This stock might have a slight dip under the $10 to a possible downslide of $9.25...but I estimate that after the slight dip, it should rebound and continue on it's growth cycle for the next year.

Another one of those "personalized" suggestions.

Just look at the record of the mgmt. One of 2 co's in a duopoly of towing truck industry in U.S. Actually owned this since $5.49 but couldn't rate until now because of mkt cap requirements.

This is sill greatly underpriced vs. intrinsic value.

Must agree with kristm, "boring, slow growth, meat and potatoes". Solid company: I'm sure it will roll with the punches. We need them, they need us.

This company is bound to go up if their earnings stay in line with estimates.

none

Just a hunch

This company is midsized in a industry slowed by energy and manufacturing costs. However, earnings are still in positive growth for this company, and should continue as the economy begins to crawl out of the recession over the next five years.

Testing out a portfolio of smallish-cap 5-star stocks found using the CAPS screener. All picks have at least 50 allstars backing them, which should be enough to minimize star rating fluctuations. It's been less than a week, but so far so good!

Contrarian pick for growth and low debt. Not a stellar performer but it has good growth potential and the PPS has irrationally languished. No debt, solid but not unrealistic growth. Low PE

Company has had solid results for years. A very low P/E, good cash position, steadily increasing sales. A defiinite go.

This is what I'd consider a "meat and potatoes" type stock. It's not a tech stock, not a Chinese stock, not a biotech concern. Just plain folks. A boring, slow-growth business making something that nobody thinks about until they need it - but eventually we all need it!

Stock is approaching its 52-week low, with a P/E below 7. Has taken a hit on slower earnings for the last quarter but that's a temporary setback, the company is still strong and worth more than what it's selling for right now.

Has a strong business, with holdings overseas. Based in Chattanooga, TN, where tow trucks were invented. Main competitor is Jerr-Dan, a division of Osh Kosh (OSK). I'm marked outperform on it, too.

Disclaimer: I'm also picking this one to support some local businesses. This is the best Chattanooga area stock I've found so far.

Miller participates in the highly un-sexy business of manufacturing vehicle recovery and towing equipment. They manufacture from light duty (8 ton capacity) to heavy duty (75 ton capacity) wreckers and car carriers (those auto transport carriers you see on the highway full of new cars). The company went public in 1994. They created RoadOne – a towing services company – in 1997. The division was a drag on earnings and profitability. Miller sold off the towing assets beginning in 2002. By 2006, all towing assets were sold off. This marked a period of turnaround for the company as it moved to focusing on its core business of selling wreckers and car carriers.

Interesting statistics:

William G. Miller is chairman of the board and co-CEO. According to the most recent 10-K, he owns over 12% of the outstanding shares of the company.

During 2002-2003, when the company decided to exit the towing business, the ROE averaged 7.6%. From 2004-2006, since the exit from towing, ROE has climbed to an average of 22.5%. It appears they do well when they stick to their core competency: equipment manufacturing.

During the turnaround phase of the company, it entered into a Junior credit agreement with William G. Miller for $5.0m. As of their last 10Q, this debt was paid off.

The Bear Case:

On August 7, Miller announced its quarterly results. Sales increased 18.4% and income before taxes increased over 20%. Two things dampened investor enthusiasm:
1) Miller’s effective tax rate increased to 37.7% from 14.4% due to expiration of tax loss carry forwards. This had been previously communicated.
2) The following statement accompanied the announcement: Mr. Badgley concluded, "With the completion of the most recent municipal and military orders and with no additional follow-on orders on these contracts to date, our order intake has moderated. We expect this to cause net sales for the remainder of 2007 to be lower than those achieved during the past several quarters. While we remain optimistic about our ability to secure additional follow-on orders, we cannot predict the success or the timing of any such orders under these contracts. We continue to be concerned about general economic conditions and the effect they could have on the towing and recovery industry, as well as the level of acceptance by our customers of the 2008 chassis with new engine emission requirements. Accordingly, we have taken appropriate steps to reduce our production levels and lower our costs for the remainder of the year in response to these uncertainties. We will continue to monitor our cost structure to ensure that it remains in line with business conditions."
Market reaction was strong – moving the stock from 23.96 to 19.10 where it hovers today.

The reality of lowered sales for the short term is complicated by the fact that Miller is upgrading one of its low duty tow truck plants. This will consume an estimated $14m in cash this year, of which $2.3m has already been spent.

The Bull Case:

The market may have over reacted. Although top line valuation is difficult due to the affect of RoadOne in the past, we can make some ball park estimates. Looking at pre-tax income for the past two years (after RoadOne), and applying the new tax rate we might estimate $22m in income (lower than last year’s peak of $26m) and a conservative EPS of $1.2. This puts Miller at a comfortable PE of 15-16X. A comparable (but larger) OshKosh truck commands a 17-18X multiple currently.

Using DCF on current owner earnings/share, I calculate a range of values from $21 - $29 using growth rate assumptions from 10-20% and discount rates from 10-15%. Analysts are no help here, because none cover the company.

Additionally on the positive side, the balance sheet is very strong with virtually no long term debt (it has been significantly paid down over the last 3 years), $8m in cash and a low percentage of goodwill.

The founder appears actively engaged and well incented (with about $26m of stock on the line). Some may view the loan as a conflict of interest, and maybe I’m being naïve, but I think it was done to help his company through a tough patch. Particularly since it was junior debt, my read is that he has enormous confidence in the company and is putting his dollars behind that conviction.

Their major competitor is Jerr-Dann corporation, which is owned by OshKosh. I like these duopoly type situations – think Walmart v. Target or Intel v. AMD – because the competition keeps the players sharp on costs and efficiency, but it is not so severe that it will likely drive either to an unprofitable situation.

I also like to see such high caliber value shops such as Hotchkis & Wiley and Royce & Associates amongst the fund owners.

Final Analysis:

I think the bulls outweigh the bears. This one seems to have a high probability of success. I would not be surprised to see Miller drift a little lower until the benefits of the plant upgrade are felt and the short term order dip is filled. In the event that a business slump is prolonged, I imagine that the capital upgrades could be delayed and the balance sheet is strong enough to weather the storm. Although I never really buy on take-over speculation, this reminds me of another company I was looking at a while back (but unfortunately never pulled the trigger on) – JLG Industries (they manufacture lift trucks and man-up vehicles) – which was bought by OshKosh truck. Similar to JLG, Miller has great investment returns in a profitable niche.

I live a mile from their Ooltewah, TN, plant. It faces I-75, right on my way to work, so I drive past it several times a week. I watch their inventory yards, both incoming and outgoing, and both have been "full" for over a year. Ooltewah is a small town and does not suffer rush-hour gridlock, but I can monitor the traffic as their dayshift lets out and all the cars get backed up at the traffic light. That has remained constant for about two years.

The numbers on this company are STELLAR and since this stock is down 30%... well it looks like a good time to buy
p/e ratio: 10.6
price/book: 2.49
debt/equity: .09
'nuff said

On a day where almost anything is working, this stock is down 28% on not-great-but-still-decent earnings report. I love how they always try to report after market close.

Anyway, they paid a lot into taxes compared to last year. But sales, margins, etc. all look fine on this stock. I don't see anything in the numbers to indicate that a 30% pullback is warranted.

Miller Industries manufactures vehicle towing and recovery equipment primarily in the United States. It offers a range of wrecker, car carrier, and trailer bodies. Its wreckers range from the conventional tow truck to large recovery vehicles of 8 to 70 tons capability that are used to recover and tow disabled vehicles and other equipment. Car carriers transport new or disabled vehicles and other equipment whereas the trailers are used for moving multiple vehicles for auto auctions, car dealerships, leasing companies, and other applications.

The success of the towing and recovery equipment industry depends primarily on the usage of vehicles. As per the Bureau of Economic Analysis, total vehicle usage and new vehicle registration in US has gone up annually by over 1% in the past decade. This goes well for Miller Industries as it generates over 81% of its revenue from North American operations. The fiscal performance of the company for the nine months ended September 2006 has been good with about 13% rise in the top line. Looking ahead, management has a received a contract to manufacture over 130 small wreckers for the New York government and approximately 300 trailers for Datapath which could aid the top line growth of the company.

On the operational front, company has been able to improve its gross margins significantly despite rising cost of aluminum and copper, which are the key raw materials of the company. After huge hike in the past few years, copper prices are likely to go down in 2007 as construction activity is slowing down in US, which is reducing demand for copper. Also, aluminum prices are also expected to take a plunge since global production levels are expected to exceed the consumption by 1.1%. Stabilization of energy prices is another sweetener for the company as the transportation costs get reduced. In the light of these factors, Miller Industries looks set to have a bull ride ahead.

5-star $254 million market cap on 11/24/06.
Tow trucks and car carriers in all sizes.
5STARsmallCAPS picks five star stocks with the smallest market caps.

I've been following this company since TMF mentioned it a few times. I think the company will get a small boost from a newly elected U.S. Senator in Bob Corker, former mayor of Chattanooga (where the company is based.) He toured the plant on a campaign stop and mentioned that the company had products that were being used in Iraq. He will look out for the jobs in his hometown...