San Francisco presenter likes A.M. Castle (CAS) very asymmetric risk/reward

July 23, 2013

A.M. Castle (NYSE: CAS, $16.16) was presented as a Buy at our July 17 San Francisco idea forum.  The presenter highlighted the company’s leading position in the niche steel service center/distribution space.  The new CEO hired in October 2012 is successfully leading  restructuring efforts to get rid of inefficiencies from the growth through acquisition strategy of the last 10 years.  EBITDA is on track to rise by $33 million from $55 million by the end of 2014, while the company is also shifting $200 million in excess inventory in the same time frame. 

The presenter believes CAS is a very asymmetric risk/reward opportunity at this price.  Downside is limited at this level, while upside is $27 based on a conservative 6.5x forward EBITDA multiple.  Further upside to $40 is possible if the company’s end markets improve sustainably.  CAS is an attractive buyout target as well, considering consolidation in the industry and the company’s strong relationships with customers.

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