econ1: Conrad Industries closing price yesterday was $37.00. I do hold CNRD now. I acquired it a couple of years ago around $20.00. Conrad operates 4 shipyards in Texas and Louisiana. Here is how it currently stacks up against my criteria:
(1) Small Cap - Market cap is about $220M.
(2) Low Debt - No long term debt, 2.62 quick ratio, 1,930.2 X interest coverage.
(3) Sustainable Products - Until recently, I was quite complacent on this factor thinking that shipbuilding should be quite a stable, if somewhat slow growth industry. However, I believe Conrad does a significant amount of work for the offshore oil and gas industry. The recent notable oil price slide and growing fears of an oil glut are a real concern. Drilling for oil under the ocean has to be a very expensive way to find it and so I am particularly concerned about off-shore drilling both in the short term and long term. A sustained downturn in oil prices may be a sign to get out of CNRD for a while. CNRD's order backlog number bears watching for signs of deterioration. So far no problems, but....
(4) Little Government Influence - Conrad sells some product to governments, however, I don't believe it is overly dependent on government contracts. Nor do I think that shipbuilding is a particularly over-regulated industry or an industry that is a political target relative to other industries.
(5) Low or Reasonable PE and PEG ratios - The PE is 7.39. The 3, 4 and 5 year historical average earnings growth rate is 25.39% for a PEG of 0.29. I'd consider these numbers very favorable.
(6) Decent & Growing Dividends - Officially the company pays no dividend. However, in both 2012 and 2013 the company paid a special dividend of $2.00 per share each December. (5.40% at the current price of $37.00 per share. You could collect 10.80% in the next 14 months if CNRD continues this practice.) I'm hoping that since the company has had a good year so far in 2014, that this will recur. No guarantee at all on this, of course.
(7) Positive Recent Information - In August 2014 Bristol Harbor Group announced it is designing a 3,000 cubic meter LNG barge to be built by Conrad. In September, GTT announced it is designing LNG membrane tanks to be built by Conrad.
Summary: Low oil prices are a genuine concern for Conrad's shipbuilding business. However, it also looks like Conrad is actively preparing to get into the LNG transport barge business, which is a growing business. Last year CNRD announced 3rd Q earnings for 2013 and the special $2.00 dividend on 11-13-13. I expect they will make an announcement sometime around 11-12-14 this year.
AI
