This Stock Could Double…

| June 4, 2010 | 0 Comments

My Grandfather lost his battle with cancer years ago. I was still in Junior High School at the time.  I still remember all the cool antique toys he collected.

He had an entire corner of the living room dedicated to showing off his toys.  They were all heavy metal toys, not the cheap plastic things kids play with today.  Nothing was “Made In China”.

There were tractors, fire engines, police cars, and his favorite airplanes.  Floor to ceiling display shelves were stacked with items.

You see my Grandfather loved to attend auctions and estate sales.  He would bid on little items.  Often buying boxes full of different items too small to auction off individually.  He would always come away with little treasures.

It’s how he built his collection of antique toys. But he didn’t keep everything he bought.  On his way home from the sale he would stop by a few antique stories.  He kept anything he wanted for himself and sold everything else to the antique stores.  He turned a little profit almost every time.

It’s how he made his “coffee shop” money.

He was great at turning one man’s trash into another man’s treasure.

I found a business with the same business model.  Just the other day I came across this company.  And I think their stock price could double from here.

The name of the company is Industrial Services of America (IDSA).

IDSA recycles stainless steel, ferrous, and non-ferrous metals.  They purchase scrap metal from industrial and commercial companies.  Then they sort, shear, cut, shred and bale it.  The bales of recycled goods are sold to steel mills and other end users.

Their business is booming.  Last quarter the company grew revenue by 206% and earning grew by 127%!  That’s some serious growth.

Management has done a remarkable job of positioning the company for growth.

They’ve added capacity and developed strong relationships with the companies who sell them scrap metal.  With their current operations they have room for “significantly higher sales with very little if any capital outlays”.

That means as they grow their business they’ll be able to expand their margins.  They’ll be generating even more earnings and cash flow for every additional dollar of revenue.

IDSA recently did a 3 for 2 stock split.  Their goal was to increase the size of the float.  It was too small for the all of the institutional investor interest their stock has gotten lately.

Investors have sent IDSA stock price up sharply.

Despite the impressive run IDSA looks undervalued to me.  They have a forward P/E of just 8.85x.  The industry average P/E is closer to 20x.

That’s why I think IDSA’s stock price could double from here.

If IDSA keeps growing… and their valuation starts looking like the rest of the industry…  The stock could be trading for $20 a share or more in no time.

Take a look at IDSA.  They’re turning one man’s trash into treasure for their shareholders.  And that’s an investment strategy my grandfather would have loved.

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Category: Stocks

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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