Last week FreightCar America, Inc (NASDAQ:RAIL) released its Q2 2016 quarterly report.
FreightCar is a diversified manufacturer of railcars and railcar components. The company designs and manufactures a broad variety of railcar types for transportation of bulk commodities and containerized freight products primarily in North America, including open top hoppers, covered hoppers and gondolas along with intermodal and non-intermodal flat cars.
Lets take a closer look at its performance…
The company reported a 46% reduction in quarterly revenue of $126 million, down from $235 for the previous corresponding period.
(Source: Company Reports)
The decrease in Manufacturing segment revenues for the 2016 period compared to the 2015 period reflects the decrease in the number of railcars delivered, partially offset by a higher mix of new versus rebuilt railcars. Railcar deliveries for the second quarter of 2016 were impacted by production inefficiencies and supply chain delays.
Gross profit was also down 61% to $8 million from $21.8 million for the previous corresponding period. The decrease was put down to deliveries and higher production costs related to certain new railcar types.
All of this resulted in a net loss for the quarter of $0.5 million down from $7.4 million for the previous corresponding period.
Let’s look at the balance sheet…
FreightCar currently has assets worth $368 million of which $63 million (17%) is held in Cash and Cash Equivalents. Inventories are listed at $136 million (37%), and Goodwill is listed at $21 million:
(Source: Company Reports)
The company’s total liabilities are listed at $109 million with $78 million (71%) of those being current liabilities and it has zero debt:
(Source: Company Reports)
Tangible Book Value
Tangible Book Value is defined as the total assets of a company, minus any intangible assets such as goodwill, patents and trademarks, less all liabilities and the par value of preferred stock.
A company’s tangible book value looks at what common shareholders can expect to receive if the firm goes bankrupt and all of its assets are liquidated at their book values, and intangible assets, such as goodwill, are removed from this calculation because they cannot be sold during liquidation. Companies with high tangible book value per share provide shareholders with more insurance in case of bankruptcy.
FreightCar has Tangible Book Value of $238 million (Total Equity $259 million minus Goodwill $21 million), and the company currently has 12,731,678 shares outstanding.
So, if we divide the Tangible Book Value $238 million by 12.73 million shares, that means FreightCar has $18.69 of tangible book value per share.
With the company currently trading at $14.48, that represents a 23% discount to its tangible book value per share.
All Investable Screen
We currently have FreightCar at an Enterprise Value of $83 million and an Acquirer’s Multiple of 1.63, well below its Market Cap of $184 million.
So, while its latest earnings have not been positive, from a balance sheet perspective the company appears to represent good value.
Disclosure: I currently own shares in FreightCar America, Inc.
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