Alpha Pro Tech, Ltd. (NYSEMKT:APT)

The coronavirus hasn’t been the only thing plaguing us this last year.

As I’m sure you’ve noticed or have seen on the news, the growing intensity of storms in both the winter and now summer has been extremely destructive to our infrastructure.

Texas’s grid went dark because the state simply wasn’t prepared for a storm of that magnitude. Similarly, heat waves are baking the country, leading to rolling blackouts along the west coast.

On a more personal level, when the temperatures outside reach record highs, we all crank our air conditioning down as low as it can go. But many of our homes (I know mine at least), while they may be insulated, aren't exactly equipped to deal with such extremes.

That constant drain on energy not only hurts our wallets… our nation's power grid is straining under the weight as well.

This is why weatherization — or weatherproofing — has become so important recently. Techniques like house wrapping (which is literally wrapping your house in a protective layer) shields your home against the increasingly volatile elements, keeps your energy costs low and generally decreases your environmental impact.

Enter Alpha Pro Tech Ltd. (APT), a company that specializes in not only house wrapping, but other weatherproofing products as well.

During the height of the pandemic, because APT was already making construction equipment like N-95 masks, it was easy for it to move into the COVID-19 supplier role.

And the company made a lot of money doing so… Alpha Pro Tech was suddenly doing millions and millions of dollars for orders of masks, face shields and other protective equipment in 2020.

The influx of capital allowed it to start stockpiling cash — cash slated for growing the building materials segment of its business.

The CDC is starting to recommend mask mandates be reinstated in some areas, which would benefit APT in the short-term. But the company has its sights set on expanding its weatherization business, which I believe is the more lucrative move…

Up until the mid-2000s, homes weren’t being built with house wrapping pre-installed, so owners had to go out of their way to weatherproof their homes.

Now, house wrap is a code requirement for newly constructed houses. If you take into account the sheer amount of new homebuilding we saw this last year… if every one of those houses is required to be wrapped, APT is looking at some big profits ahead.

That’s not to say new homes are the only way Alpha Pro Tech can make money, either.

A good portion of America’s workforce is now operating from the comfort of their own homes. Before, if you were at the office all day, it was fine if your house got a little hot while you were gone. But now, for many people their house is their office and I for one can’t concentrate on my work if I feel like I’m in an oven.

It’s making the demand for barrier products that Alpha Pro Tech manufactures higher than ever — a trend I don’t see going away any time soon.

APT is not the only one in this space. Another player has a grip on much of this market.

As we know though, once a smaller fish starts gaining some ground, the bigger fish often choose to snap it up before it takes too much of the business.

Alpha disposable clothing and Covid masks. Buying back shares. Graham Defensive Screen

SECTOR: PASS

APT is neither a technology nor financial Company, and therefore this methodology is applicable.

SALES: FAIL

The investor must select companies of "adequate size". This includes companies with annual sales greater than $1 billion. APT's sales of $102.7 million, based on trailing 12 month sales, fail this test.

CURRENT RATIO: PASS

The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. APT's current ratio of 9.45 passes the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: PASS

For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for APT is $0.0 million, while the net current assets are $49.5 million. APT passes this test.

LONG-TERM EPS GROWTH: PASS

Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 10 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. APT's EPS growth over that period of 1,520.0% passes the EPS growth test.

P/E RATIO: PASS

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. APT's P/E of 10.70 (using the 3 year PE) passes this test.

PRICE/BOOK RATIO: PASS

The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. APT's Price/Book ratio is 1.93, while the P/E is 10.70. APT passes the Price/Book test.