Monday, July 27, 2009

LABL at a Strong Technical Juncture

Multi-Color Corporation (LABL) is what I call a "clothespin stock". They are a dull, boring little company that makes non-trendy stuff we use but don't get too excited about (like clothespins). If these companies execute well and their stock gets whacked in a market event, it can present a nice undervalued buy that is not very sensitive to chaotic market ups and downs and product cycle changes. Sounds nice in this kind of market. LABL is such a stock. They make labels of all kinds for office and home use, which you'd think would be suffering in this recession. Well, since the start of '07, their gross profit (ttm) is up 50%, operating income is up 28%, cash flow from operations is up 37%, and even net income is up 18%. Sounds like the numbers you hope to see from a kick-ass growth stock in good times. You currently get the stock at a price/sales of 0.6 and price/cash flow of 6.6 vs 1.9 and 18.9 industry group averages. Technically, you have this:
(click to enlarge chart)

Despite the good numbers, the stock has been smacked from 28 to about 12. But as the chart shows, there seems to be a clear case of seller exhaustion with this one. It was dead as a hammer over the intense February selling. Also it has been ignored by new buyers so far in the rally - a nice combination.

No comments:

Post a Comment