2014 : keep eye on gross margins (top level margins)
I have only looked at a couple of items on their 10-K and the management discussion and analysis section.
(1) They are working hard to expand their pipeline of products and scale their production facilities in order to get the benefit of "economies of scale."
Economies of scale
= read as: we have high fixed costs and we need to make
lots of plastic parts in order to spread these costs as
thinly as possible
(2) You can see this in their gross margins. Their gross margin for the year on their rail ties, mats, and STRUXTURE products is only 8%.
Some quarters the gross margins have been much better ~12%
Why is this a year to watch? Well, I would argue that every year is a year to watch if you have your money with a company. But not to be rhetorical, what AXION can do this year will show up in their gross margins. My eyes will be on this number.
I think that they have a huge market for their products. If they expand by purchasing another manufacturing facility, I will take my eyes off the gross margin for a year or two. There is a dynamic trade-off between gross margin and expanding capacity. Manufacturing firms' business models are setup to lose money until economies of scale start producing returns.
Again, I haven't read the 10-K in detail. Did anyone get any information about their new markets or products in their pipeline?
GLTA,
-D&C
