Xometry (NAS:XMTR) — mrkt cap $582mm; Price $11.9; EV/EBITDA NA
STARTER POSITION INITIATED. Xometry— Another company from the IPO class of ’21 that has seen its stock price crater—is a digital platform leading the charge to digitize the highly analog world of manufacturing (non-contract manufacturing specifically). Xometry provides instant quoting on custom parts and connects buyers to a global network of suppliers/manufacturers. Xometry is the market leader in breadth and depth of services: any custom part that is needed and number of runs is easily streamlined: anything from CNC machining, injection molding, sheet metal, 3D-prototyping, tubing, fabrication, and more. Their aim is to be the customers’ one-stop shop for any non-contract manufacturing – not only will this save customers on direct costs through more competitive pricing but will also replace the management of a long tail of suppliers with a single point of contact. The company is not quite cash flow breakeven but has plenty of liquidity and is exhibiting operating leverage. Xometry’s market opportunity is massive and management will continue to be intelligent about balancing growth and profitability.
Star Group (NYSE:SGU) — mrkt cap $382 mm; Price $10.87; EV/EBITDA 7
MORE RESEARCH NEEDED. We came across Star Group on our screen for companies with little to no coverage. SGU is the largest distributor of heating oil in the USA. It reached infamy when Dan Loeb wrote a blistering activist letters denouncing the governance and operational execution of the company. Management was changed and the company has operated in radio silence since. After speaking with the CFO, we came away impressed with their execution and allocation strategy. SGU has repurchased more than 50% of its shares outstanding over the last decade and has a clear valuation bogey for when to do so. More work needs to be done on the heating oil industry and the underlying trends.
ACCO Brands (NYSE:ACCO) — mrkt cap $445mm; Price $4.65; EV/EBITDA 12
PASS. ACCO manufactures branded office and school products. It owns several well-known brands such as Swingline, FiveStar, and Kensington. ACCO’s end markets have been in secular decline and its share price has declined 80% over the last 20 years. The current strategy of the firm is to streamline the business and deleverage. Although this is bearing fruit with the last quarter showing a marked increase in profitability, it is difficult to own a business that is in secular decline and highly levered. We will keep ACCO on our watchlist for changes in their end market demand.