February 23, 2025
Core Molding is a manufacturer of injection molded plastics for a variety of products in different industries. For example, dashboards, radio controls, bumpers, cup holders, truck stairs, snowmobile casings, decking, fencing, trash bins, and playground slides.
Roughly half of CMT’s revenue comes from trucking customers Navistar, Paccar, and Volvo where Core Molding manufactures bumpers, side panels, wind deflectors, and interior plastic components for these customers. CMT has 5 large customers, each of which accounts for over 10% of their revenue. But no single customer is over 20% of their revenue.
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Core Molding runs its main facilities in Columbus, OH, and Matamoros, Mexico. The company also has facilities in South Carolina, Minnesota, and Ontario.
CMT must maintain good relationships with its customers. The large customers use just-in-time manufacturing. Most orders come into CMT a few days before they are expected to be shipped or delivered to the client. The finished product assemblers rely on many small- to mid-sized businesses to deliver goods quickly. As a result, companies such as CMT tend to have their facilities close to the final product assembly factories.
In early 2018, CMT acquired Horizon Plastics but the acquisition was difficult to manage. The CEO/Chairman who oversaw the acquisition left in late 2018 and the new CEO David Duvall took two years to fully integrate Horizon Plastics.
Management is highly transparent and approachable. The CFO John Zimmer quickly replies to questions and is forthright about the company. In its financial statements, CMT includes sales broken out by customer.
Core Moldings’s market cap is $118.8 million, while its enterprise value is $98.4 million.
Here are the metrics of cheapness:
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- EV/EBITDA = 3.10
- P/E = 7.62
- P/B = 0.80
- P/CF = 3.06
- P/S = 0.37
These are low metrics of cheapness indeed.
ROE (return on equity) is 11%, which is OK.
The Piotroski F_Score is 6, which is decent.
Insider ownership is solid at 11%. Cash is $42.6 million while debt is $24.3 million. TL/TA (total liabilities / total assets) is excellent at 33%.
Intrinsic value scenarios:
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- Low case: If there’s a bear market and/or a recession, the stock could decline. Or if there’s a slowdown in trucking, CMT’s revenue and earnings could decline.
- Mid case: Core Molding should have a P/E of at least 15. That would put the stock at $26.10, which is over 95% higher than today’s $13.26.
- High case: The company should have an EV/EBITDA ratio of at least 8. That would put the stock price of $30.62, which is 130% higher than today’s $13.26.
RISKS
There could be a bear market and/or a recession and the stock could decline.
There could be a slowdown in trucking, which is cyclical. The company gets roughly 50% of its revenues from truck manufacturers.
BOOLE MICROCAP FUND
An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time. See the historical chart here: https://boolefund.com/best-performers-microcap-stocks/
This outperformance increases significantly by focusing on cheap micro caps. Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals. We rank microcap stocks based on these and similar criteria.
There are roughly 10-20 positions in the portfolio. The size of each position is determined by its rank. Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost). Positions are held for 3 to 5 years unless a stock approachesintrinsic value sooner or an error has been discovered.
The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods. We also aim to outpace the Russell Microcap Index by at least 2% per year (net). The Boole Fund has low fees.
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