Plastic packaging films maker AEP Industries Inc. (AEPI) has seen its stock price shoot up more than 60% year-to-date, due, in part, to its buoyant earnings results. Given its commanding positions in a number of packaging niche markets, strength across multiple areas, solid double-digit earnings growth projections and attractive synergies from an acquisition, this Zacks #1 Rank (Strong Buy) should be attractive to aggressive growth investors.
A Solid Growth Pick
AEP Industries posted strong second-quarter fiscal 2012 results on June 11, delivering a staggering 123% positive earnings surprise. The New Jersey-based company logged earnings of 87 cents per share, which trounced the Zacks Consensus Estimate of 39 cents. Revenues advanced 19% year over year to $296.7 million, aided by a higher selling price and sales volume, as well as last years acquisition of Webster Industries.
Operating income nearly tripled year over year to $12.7 million, supported by improved efficiency and cost control measures. The company expects synergies from the Webster buyout to continue driving its results moving ahead. The acquisition has enabled it to reinforce its foothold in the private-label plastics market.
Estimates Moving Higher
The Zacks Consensus Estimate for fiscal 2012 has climbed 46% over the last 30 days to $1.64 per share, indicating an estimated annualized growth of roughly 142%. For fiscal 2013, the Zacks Consensus Estimate rose by 28% over the same timeframe to $2.79 per share, marking a projected year-over-year growth of nearly 70%.
AEP Industries trades at a premium to its peers by most metrics. Its trailing twelve months P/E of 29.28x is well above the peer group average of 17.43x. Moreover, the stock it currently trading at a forward P/E of 27.59x, representing a roughly 73% premium to the peer group average of 15.96x. The price-to-book of 4.47x is also much higher than the peer group average of 1.79x. However, given the strong earnings trajectory, the premium valuation should not scare investors away.
Chart Showing Potential
The price and consensus chart shows that the earnings estimates lines have been mostly above the stock price. While there have been a few waxes and wanes in estimate revisions, the stock has begun to catch up with the rising earnings estimates of late, signaling the potential for further upside. On the performance front, AEP Industries has clearly outstripped the S&P 500 over the past year, yielding a year-to-date return of 62% versus 8.96% for the benchmark.
Founded in 1970, AEP Industries Inc. is a manufacturer of plastic packaging products in North America. The company, which has a market cap of roughly $252 million, makes and distributes an array of polyethylene, polyvinyl chloride and polypropylene flexible packaging products for consumer, industrial and agricultural applications. AEP Industries has manufacturing facilities in the U.S. and Canada, and markets its products directly as well as through distributors to end-users.