Knowing their customers, IMO if you are an astute investor and looking shorter term (say 1 year or less), is quite important especially in light of their concentration of sales to specific customers and the company's small market cap.
I agree with you as they get bigger and sell to more customers in broader areas that over the long term it will lend toward your thoughts being reasonable.
But if their biggest customer went belly up tomorrow I'd be selling quickly and waiting for a Q or two to smack them before loading the boat again.
But their biggest customer IMO is kicking butt and has been hitting new highs with very aggressive expansion plans in the coming couple years planned.
The price of iron ore is more important to them (AYSI and their customers) than the price of steel, although obviously the supply/demand changes as iron ore price increases. The fact that iron ore almost doubled in price over last year's levels means the WA miners are pulling their hair out right now trying to bring on more production. This is IMO very bullish over the short-mid term 1-3 years timeframe.
The other thing is wear plates are sued in many difft applications outside iron ore mining of course, but the company hasn't been able to get a larger foothold in those areas (yet).
Eventually all the iron ore production will reach levels to where price balance comes back and profitability of the miners wanes. But if they can still get iron ore out of the gorund with healthy profits, AYSI continues to look good. We'd have to have a huge worldwide collapse of the steel markets IMO to drop iron ore price by 50% from current levels.
And IMO that is nowhere on the horizon so AYSI is safe IMO, but htey will ahve lumps and bumps along the way with quarterly gyrations, capacity ramp, customer lumpy orders, etc...
All IMO.
Good luck, hope you're still long.
I don't mind stealing bread from the mouths of decadence... But I can't feed on the powerless when my cup's already overfilled.
-Temple of the Dog
"We didn't build this company on the sniff of an oily rag."
-Anonymous
I don't mind stealing bread from the mouths of decadence... But I can't feed on the powerless when my cup's already overfilled.
-Temple of the Dog
"We didn't build this company on the sniff of an oily rag."
-Anonymous
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