Overview: Sentiment and Stocks
Last year, we were keeping close tabs on Exco Technologies (XTC). Exco provides aluminum-focused tooling and interior trim components to the industrial and automotive markets with factories in seven countries on four continents. The stock was in a multi-year bear market, but the continued insider buying suggested investors were being too gloomy about the company's outlook. That set up a contrarian opportunity which we wrote about last year.
Fast forward to December 2nd of this year when Exco reported results for the twelve months ended September 30. While sales came in at $412.3 million, down 18.7% from the prior year, due primarily to COVID-19, earnings rose to $0.69 per diluted share from $0.65 a year earlier. A combination of expense management, product mix shifts, government support programs, and other factors drove the improvement. Meanwhile, trailing 12-month free cash flow, according to Refinitiv, was $0.65 per share as of September 30, up from $0.52 a year earlier.
Investor sentiment seems to be improving as investors start to anticipate economic growth as the world works its way out of the pandemic. Exco is up 12.4% since we last featured it on December 30, 2019, ahead of the INK Canadian Insider Index, up 6.8%. Despite the rally, Exco's valuations remain attractive on a relative basis. It has a trailing 12-month P/E of 13.1 versus a broad TSX average of 23. It is also trading firmly above its 200-day moving average of $6.79. That suggests any pullback could provide a nice opportunity for both growth and value investors.