It's certainly not as big as Berry Plastics Group Inc. (NYSE:BERY). It's not even as big as Tredegar Corporation (NYSE:TG). There's one big way AEP Industries (NASDAQ:AEPI) can certainly compete head-on with BERY and TG right now, however... as an investment opportunity. Thanks to the bullish bump AEPI gave us last week, a long-standing selloff has been revered, and there's a whole lot of ground to make up.
For those not familiar with it, AEP Industries makes plastic film used by all sorts of manufacturers that need to package their products. The $215 million company generated $1.15 billion sales over the past twelve months, and turned $111,000 of it into a net profit. It was a fairly atypical quarter for AEPI though, which normally drives between $10 million and $20 million in net income when the top line is around $1.1 billion. For the sake of comparison, Berry Plastics Group has turned $4.78 billion in sales into $84 million in net income over the past four quarters, while Tredegar Corporation generated $34.9 million in net income off of $953 million in sales over the past four quarters.
Still, even in a normal year AEP Industries is just average, so what makes AEPI such a must-have stock now? It's got to do with the chart - after nearly nine months of selling we're finally seeing a real hint of a rebound.
The weekly chart of AEP Industries tells a big part of the story. Thanks to last week's pop, the stock has broken above two falling resistance lines that have been guiding it lower for quite some time.
When we zoom into the daily chart of AEPI, we see the same breakout effort, but we can also see how the capitulatory days from early last week and the subsequent breakout days on Thursday and Friday together point to a big pivot point for the stock; volume surges often represent the final flushout of the sellers and the sharp buy-in from the eager buyers. We saw evidence of both the buying and the selling surges in this timeframe. And, as oversold as the stock is, there's little doubt it's ripe for a reversal - the market has already tipped its hand.
As for the prompt for the turnaround, most of it can be attributed to speculation about the upcoming earnings report scheduled for tomorrow. Last quarter underscored some of the company's cost and competitive problems though, so the market's going to be on edge looking for signs of change. There's value galore here, however, if there's just the tiniest amount of faith that the next twelve months will be relatively normal ones for AEP. And, given the shape of the chart, it looks like investors are expecting to here good news. Just for the sake of safety, however, it might be wise to wait until AEPI pops above the 100-day moving average line at $39.27 before wading in.
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