Sunday, March 13, 2016

Watch List: American Railcar Industries Inc.

American Railcar Industries Inc. (ARII) is one of the leading North American manufacturers of rail cars. More specifically, they manufacture and service hoppers and tankers. Hoppers are generally designed for transporting coal, grains, and other goods that could have an open top and draining bottom for easy load and leave. Tankers on the other hand are designed for transporting various liquids. The company both produces, services, and leases the rail cars.

Breakdown of Data:

Dividend Yield: 3.83%
Annual Payout: $1.60 - paid quarterly
Payout Ratio: 34.5%
Dividend Growth: 3 years running
Ex-Dividend Date: March 16th, 2016, payout of $0.40/share
52 Week Moving Average: $33.02-60.42/share
Current Price: $41.79/share
Discount: 30.83% discount
P/E Ratio: 6.53x
EPS: 6.40
Balance Sheet: declining from 2011 to 2014, up again in 2015
Income Statement: Increasing revenue consistently from 2011-2015, no drops
CEO: Jeffrey Hollister


Overall, I really like this company and I'm at a loss as to why it's at such a discount. The CEO, Jeffrey Hollister has a strong background of success. He has over 23 years of experience in financial management and has been serving under the company since 2005. Since he's been at the helm of the ship, profits have continued to move forward and that means good things for the future. Also, with loads of future orders on rail cars still in their queue, revenue seems like it will continue to move forward. I state these things first because I honestly feel like that's the most important thing when you analyze a stock. If someone is at the head of the company and they have no financial background, you're probably looking towards a future in the pits as so much of a company's profitability has to do with how they move their money.

If we look away from the head of the ship, the financials look good, the dividends are young and upcoming, and the stock price is oh so deliciously low. In a market that is so full of over valued stocks, it's nice to see a light at the end of the tunnel with a solid company. This can also help to move the portfolio towards further diversification because I don't currently own anything in the railroad game and I want a piece of everything that has dollar signs attached to it.

Rail roads are money. There is a huge barrier to entry and that means that the players of the game will likely stay the same. If the players in the game are clearly purchasing rail cars from the company you're looking at, they will likely continue to as long as the product holds up. It's hard to change your mind about a positive company into a negative outlook after you've built an understanding of that company. On the other hand, it's easy to always see a company as garbage if it was at any point garbage. With this being said, I think I want to toss some money at ARII. Their dividend is very young but it is a solid percent and I think their company's growth easily supports more raises in the future.

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