Finding Value in Protective Gear with Alpha Pro Tec, Ltd. (APT)

Finding Value in Protective Gear with Alpha Pro Tec, Ltd. (APT)

Some stocks go up in price based on fundamentals. Others rise due to momentum-based enthusiasm. In the case of the issue I want to bring your attention to today, both factors have been in play recently, and may continue to attract buyers.

Its name is Alpha Pro Tech, Ltd. (APT) — a “bread and butter” company that is steadily growing its top and bottom line — with several catalysts in play that may provide some nice trading gains in the weeks ahead

Alpha Pro Tech, Ltd. develops, manufactures and markets innovative disposable and limited-use protective apparel products for the industrial, clean room, medical and dental markets. The company’s Alpha ProTech Engineered Products division also manufactures and markets a line of construction weatherization products, including building wrap and roof underlayment.

In August Alpha Pro Tech reported Q2 results, and they were quite good. Year-over-year for the period, revenues rose almost 10% to $12.3 million, up from $11.2 million in 2013. Net income increased 88.8% to $895,000 for the quarter ended June 30, 2014, compared to $474,000 for the quarter ended June 30, 2013. Basic and diluted earnings per common share for the quarters ended June 30, 2014 and 2013 were $0.05 and $0.02, respectively.

At the same time, selling, general and administrative expenses decreased to 26.9% of sales for the quarter ended June 30, 2014, compared to 28.5% for the quarter ended June 30, 2013. By any measure, that’s one important “tell” that the company is being well managed. In addition, the company currently has no outstanding debt and maintains an unused $3.5 million credit facility.

In another highly bullish development, Alpha Pro Tec management has extended its aggressive share repurchase efforts — almost always favorable to any company’s shareholders.

“During the quarter, the board authorized a $2.0 million expansion of our existing share repurchase program,” said Lloyd Hoffman, Alpha Pro Tec’s Chief Financial Officer, commented. “At the end of the quarter, we had $1.85 million available for additional stock purchases. Year to date, we have repurchased 815,200 shares of common stock at a cost of $1,745,000, bringing the program total to 11,340,178 shares of common stock at a cost of $15,671,000 since the repurchase program’s inception,” he said.

As you can see from the chart below, prior to the Q2 earnings announcement, APT shares had been trading in a narrow 6-month channel between strong support at $2.00 per share, and stout resistance at the $2.30 level. The Q2 earnings news spiked the shares all the way to $2.50, with profit-taking kicking in to knock APT back down to the $2.30 mark — albeit briefly.

APT

Taking courage from both APT’s nice bottom line, and solid guidance, market participants eventually drove the issue up to a new 52-week top of $3, touched on August 27. Once again profit-taking kicked in to push the stock back down to $2.50 per share, where it held before buyers re-entered the fray.

A pair of “macro” catalysts have conspired to continue to whet the market’s ongoing appetite for APT shares. Because the company sells medical protective clothing — including disposable masks — the unprecedented Ebola virus outbreak, coupled with a powerful bug that has been threatening the health of children recently across the U.S. — APT shares are being picked up as possible beneficiaries of those developments.

[mepr-rule id=”994″ ifallowed=”hide”][mepr-unauthorized-message][/mepr-rule]

[mepr-rule id=”204″ ifallowed=”show” description=”penny_pick_elite_members_only”]

Normally I’d steer clear of a stock whose shares are simply flavors of the month, fodder for day traders looking to make a quick buck then move on to the next big thing. In Alpha Pro Tec’s case, however, there appear to be solid fundamentals and enough growth potential to make the stock desirable to patient value investors.

Currently, APT is sitting at about $2.75 per share, which looks like a good entry point from where I sit. I would look for the stock to test the $3 level once again at some point in the near future. If enough volume comes in to push it through $3 — a price APT hasn’t seen since 2010, then there is a very real possibility of a blue-sky breakout.

[/mepr-rule]

[mepr-rule id=”988″ ifallowed=”show” description=”executive_lounge_members_only”]

Normally I’d steer clear of a stock whose shares are simply flavors of the month, fodder for day traders looking to make a quick buck then move on to the next big thing. In Alpha Pro Tec’s case, however, there appear to be solid fundamentals and enough growth potential to make the stock desirable to patient value investors.

Currently, APT is sitting at about $2.75 per share, which looks like a good entry point from where I sit. I would look for the stock to test the $3 level once again at some point in the near future. If enough volume comes in to push it through $3 — a price APT hasn’t seen since 2010, then there is a very real possibility of a blue-sky breakout.

[/mepr-rule]

As always, trade APT and all stocks with caution!

Warren Gates, Senior Analyst, Normandy Research

Leave a Reply

Your email address will not be published.*

Powered by WishList Member - Membership Software
GET YOUR FREE SPECIAL REPORT:
"THE SEVEN DEADLY SECRETS OF CHINA"

GET YOUR FREE SPECIAL REPORT:

"THE SEVEN DEADLY SECRETS OF CHINA"

Enter your e-mail address to claim your FREE Special Report “The Seven Deadly Secrets of China”

You have Successfully Subscribed!