BMC started ramping up capital investment in 1996 in the
face of surging demand and in order to
modernize operations in the hope that increased efficiency
and capacity would result in savings on the cost side as they
expanded. They accelerated investment in 1997 even more, which
hurt profits as Asian price competition heated up, but
now feel they have the capital improvements in place for greater
efficiency and possibly lower costs going forward. Management feels
any efficiencies will become especially apparent in the bottom
line going into the latter half of 1998, augmented by a pick-up
in top line growth.
That's their party line. My feeling is that the company really
started to grow recently and just had to pour a bunch of money into
capital investment programs to keep up. Now things have slowed down,
and the capital spending splurge is somewhat behind them. As a result, comparisons should be good going forward. As it stands, I was
attracted by the sharp stock fall despite continued solid profitability, consistently high ROE, a conservative balance sheet,
proven stock buybacks, and intense insider interest.
I'm satisfied, but as always, everything I post on my web site
is meant as a starting point for further research, not a
recommendation.
Good Investing,
Mike |
