Navistar International Corp (NYSE:NAV)

http://www.fool.com/investing/general/2012/02/06/the-natural-gas-conversion-is-accelerating.aspx

CROIC looks very high, and this looks very cheap at a PE of 1.8. Would like to see FCF out-pace NI, but I think NAV is getting there. Found off of a personal value screen.

cheap,low p/e,solid product,good management,very beaten up

below book

I sense vision in this company. It's looking forward in the transport industry, buses esp, where there's a niche. It's latching onto the modern diesel technology, and could improve its product further with attention to weight reduction and aerodynamics.
Its metrics are very satisfactory.

Navistar has been infantile in their approach to meeting emissions. About 2-3 years ago, Cummins and possibly others were slated to be an engine supplier for Navistar in 2010. During the initial stages of development, Navistar had been making a big hooha about how they're going to be the only truck maker with an EGR-only solution. Of course, it became apparent to the entire industry that SCR would be required to meet emissions in a reasonable manner. This led to a fallout between engine manufacturers and Navistar, and Navistar decided to make their own engines. They bought design rights to a CAT base engine, and have been developing that engine. When I saw their engine at the Mid-America truck show in 2009, it looked like an expensive mess. Lo and behold, when 2010 emissions came into effect, they didn't have their engine ready.

Instead of being nimble and rational in the face of these ever changing emission requirements, Navistar is choosing to be a stubborn and contrarian. They've got their 2010 EPA certification finally, but you can also expect a few things as a result. They are the only suppliers with the EGR-only option, so I wouldn't be surprised if they got significant market share in the near term. But soon people are going to find out that their fuel economy and performance is sub-par (it's always a trade off with EGR). Fuel economy is a really really big deal in this industry and when fuel prices eventually rise, there's going to be a problem. I also wouldn't be surprised if they had major warranty issues with EGR. This stubbornness about EGR is also going to cost them when we go into the next emissions cycle.

Navistar may do well in the near term, but in the long term, they are going to get crushed by truck companies using Cummins and Detroit Diesel engines.

The age of the US fleet is the oldest it has ever been and will need to be updated. This should help all truck makers.

EGR is a failed technology and one of their biggest customers has decided to move their purchase order to Volvo. The purchase of Caterpillar's engine platform for on highway use will prove to be a disaster.

Advanced EGR is a failed technology and the purchase of Caterpillar's power-plant will prove to be a poor decision. The whole of the class 8 truck market, with the exception of Navistar, is moving into SCR technology.

US is starting to build again need to oilslick&storms.

Removed Positions (Sold out completely):
less than 0.5% of previously reported assets

This met a high level screen to indicate a sell and strong underperform against its peers (other tickers in its industry). My 1st version of this spreadsheet devles deep into the company's balance sheet and recent income statements, combined with other relevant price data for the company including insider/institutional holdings, short interest, debt levels, etc.
I'm testing capabilities of this 1st version of my automated, valuation spreadsheet matched with my personal criteria and see how it holds up.

Heavy duty trucks and engines not competitive in 2010

Large Canadian military contract should boost their #'s until the economy picks up.

They have a new over the road diesel coming out. They have a deal with cat for an ofroad vehicle powered with a cat engine. Infrastructure plans will help them. Good company for a long term play

Although I have concerns, I think NAV is undervalued, assuming they can weather the downturn.
They've had terrible earnings vs. revenues; so bad, I can't see them not improving. Historically not the premier mfg (e.g. vs PCAR), but seem to have improved their reputation.
Good products in the U.S., Hybrids a plus, though lower gas prices will help the trucking industry more overall.
Military sales a plus, but I don't think that's the story or reason to buy.
As with a lot of industries, the growth opportunity is developing countries, but for this they need a cab-over design.
Cat JV a plus, but not sure this will be a significant revenue source.
Still, this is fairly high risk. I've never seen a stock with negative book/sharholder equity. I THINK it's undervalued, based on P/S in good times and opportunity for improvement, but debt is another factor. Note that I'm looking for realization of this value out a few years...

Good earning, military contracts

Great Military Biz, Low PE

Yes, the debt load is obscene. True, too, rival BAE just swiped a big armored vehicle order. But the P/E is too low for logic on this one, and I get a BOTEV valuation close to $12 billion, suggesting it's about 20% undervalued.

If Navistar can do a bit of debt paydown, I bet we'll see that P/E expand a bit.