Savvy Trades and Investments

[Swick984]

LMIA - I continue to buy more LMIA shares. I think there is a great opportunity here below $8.00 to get in before the turnaround takes hold and expected improvements get priced into the shares. I think current fair value is closer to $11-$12 per share and that LMIA could be valued at over $20-$25 in the next two years and the turnaround is realized. The stock price appears to be consolidating nicely here in the $7.90 range since earnings before what I expect to be the next leg up.

I mentioned that I ran a model based on the company's publicly stated financial goals related to both top-line growth and profitability improvements. The table below summarizes that analysis. As you can see, based on their 9% 2015-2018 revenue CAGR, it implies significant growth in 2017 and 2018 based on their increased content in new and large commercial aircraft (737 MAX, 777, 787, new Gulfstream aircraft, etc.) They are also targeting a 300 bps improvement in EBITDA, which is modeled as well. The results are shown below in terms of EPS expectations and lower debt levels. Management is targeting a leverage ratio of 3.0x in 2018, and this model shows them being able to get there.



Spirit Aerosystems is a large customer and has been vocal about its desires to acquire Tier 2 and 3 suppliers and I think LMIA would eventually be a great fit for them. I don't see LMIA selling until they've been able to substantially realize their planned turnaround.