Today I would like to look at fundamental analysis of American Railcar Industries (ticker: ARII).
The company designs and manufactures hopper and tank railcars. It is based just outside of St. Louis in Missouri and had a Total Revenue last year of $640 million.
Valuation
The company seems reasonably priced at a trailing P/E ratio of 10.5.
The P/E for the average three preceding years come in even better at 7.9.
The Cyclically Adjusted Price Earnings (CAPE) ratio is 15.4 which is not extreme in any way.
At current prices you are paying 1.4 times Book Value.
Balance Sheet
If we then look at the Balance Sheet we can see that the Debt to Equity ratio is 1.65 which is high, but not extreme.
Most of this debt is in the form of bonds so it is not something that needs to be rolled over every year which is a good thing.
The Working Capital to Debt is 0.3 which is a little bit low, but not out of the ordinary.
Cash Flow and Dividend
The Free Cash Flow is $157 million which equates to about $8 per share.
That means that the company can pay out a generous dividend of $1.60 per share and the dividend yield is 4.1 percent at these prices.
The dividend history of uninterrupted and increasing dividends is 4 years which is also reasonable.
My recommendation:
At these prices American Railcar Industries is a BUY.
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