MSA Safety – No Investor Protection

MSA develops, manufactures and supplies products that are intended to protect users from hazardous or life-threatening atmospheric situations. Their products are used by workers in the oil and gas, fire service, mining and construction industries, as well as the military. Listed industry peers include Sperian Protection, Abatix Corporation, and Lakeland Industries.

I get it, I’m simple-minded, or at least many folks have told me I am. I see what the company does to earn its bread and I think so what? What does that have to do with the stock price being extremely overinflated? I mean look at the numbers, and these are just a few of the metrics that many investors like to use.

A trailing twelve month PE of 67, an enterprise value to free cash flow of 45, a price to free cash flow of 41, an enterprise value to EBITDA of 53, and merger and acquisition return period of 53 years. Not to mention a leverage ratio of 7, debt growth of 22%, year over year free cash flow growth of -38%, and year over year earnings growth of -51% even though the company spent $216 million on acquisitions.

Then this morning I read that the wizards at R.W. Baird and Company upgrade the stock to Outperform with a target price of $98, and included this comment which I thought summed up their rating upgrade perfectly. “…outlined long-term financial targets that were consistent with his expectations and reflective of a shift from optimizing the portfolio/cost footprint to one focused on leveraging broadening macro demand.”

Really? What does “leveraging broadening macro demand” even mean? People really believe this dribble? Save us all if folks think this means anything!

Here’s a more pragmatic approach to this particular company. RUN MATILDA RUN!!!

In the end, my investment thoughts on the company are pretty mundane compared to the analytical wizards of Wall Street because my short-term (3-6 week hold) target price for the stock is $85.47, with an initial trailing stop at $81.70.