Valmont Industries (NYSE:VMI) is a multinational enterprise and a recognized global manufacturer and service provider in the following industries. It is involved in the manufacturing of towers, poles and structures related to wireless communication, traffic and lighting infrastructure. In addition to its various other commercial and industrial applications, it also manufactures mechanized agricultural, irrigation and food production equipment.
Valmont Historical Performance
VMI has long been considered one of the buy and hold stocks, despite being a part of the rather volatile agricultural industry. Since the turn of the century, the company's stock has experienced an increase of over 900%. The continued growth in the company's operations has led to almost continuous appreciation of its shares, aside from a minor tumble of around 66% during sub-prime mortgage crises. The book price of the company's shares should be around $146, which shows that the current price is undervalued by around 19%.
The most attractive aspect of VMI has been its consistency with the dividends paid out to its shareholders. The company paid out its first ever dividend in the fourth quarter of 1988, and since then, has continuous paid out dividends, which helped the company attract dividend investors. Currently the company has paid out a quarterly dividend of $0.375 for a share, making it one of the highest dividend yielding stocks listed on the NYSE.
A brief examination of the company's historical performance is indicative of VMI's strong business, which has perpetually grown, despite a few headwinds, and despite the recent drawbacks still is an attractive investment, especially for the dividend investors.
Stock Analysis
VMI currently boasts a market capitalization of around $2.8 billion. Its financial statement shows total assets of around $2.9 billion, with 371 million in cash, which gives us a decent current ratio of 3.51, indicating financial security for the near future. Despite the consistency in the dividend payments, the company has also retained significant amounts of earnings, and as of 2014, the company has over $1.7 billion in retained earnings.
The company's annual sales stands at around $3 billion, and according to its 12 months trailing sales figures, the company has P/S ratio of 0.95, indicating fairly equal year round sales. With an EPS of 6.29 and a P/E ratio of 19.42, it consolidates its position as a growth stock. Furthermore, the company has an impressive 5 year EPS growth of around 421%, despite the turbulence experience in 2010 and 2011.
On the technical side, a brief examination of the company's monthly price charts indicates that the price has found significant resistance at the $116, which also happens to be the 0.382 Fibonacci retracement level. The significance of this level is further increased, as it was the peak of the previous move towards the upside, which lasted from around $20 to $115, lasting almost three years. In the case that the bears do manage to break the $116 resistance level, expect another tumble towards late $80s, which would attract new investors into the market and continue the bullish trend in accordance with the company's fundamentals.
Conclusion
VMI's financials indicate that the company fundamental health is as strong as ever. However, the recent drought witnessed in California, 2008, continued through 2010 and ended in the first quarter of 2011. Despite the improving conditions in the state of California, the drought moved towards New Mexico and Texas, which ended by the summer of 2012. Due to a major portion of VMI's business associated with the agricultural sector, its performance was significantly impacted, as farmers were less inclined to make capital investments.
However, as the drought nears its end and the state of agriculture in North America, VMI's primary market improves, VMI is expected to improve its operational performance. Furthermore, the continuous gains made by the dollar throughout 2014 further exacerbated VMI's market conditions. But since the start of the stimulus package in the Eurozone and easing of the Chinese currency devaluation, the greenback seems to have found its ceiling.
All of these changes in the US and the global market seem to have finally turned in the favor of VMI again, which would be enough to serve as a catalyst to drive its share price back up and resume its long term growth.
Since VMI is undoubtedly considered a dividend stock, the new changes in the market conditions along with its strong financial health makes it look like one of the most attractive growth stocks for 2015 and 2016. Investors looking for a safe long term investment along with decent fixed incomes should definitely consider VMI as an investment, but do ensure your own due diligence before opening any positions.
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