It‘s not every day that investors have an opportunity to capitalize on a strong U.S. Dollar by buying a Euro-based multinational company with impressive financials.
Falken Industries Ltd. (OTC : FLKI) is a leading global manufacturer and commercialization of high-end specialty cleaning products for industrial, professional and consumer uses. This relatively small company has been rated a “Strong Buy” and at its current undervalued share price could be a terrific buy.
Under its primary brand name Clean Plus®, Falken Industries has successfully launched more than 160 professional and consumer auto care products which are sold in over a dozen international markets, including recently signed Turkey. Clean Plus® products are currently available in over 1000 petrol stations and other outlets in Europe.
This worldwide presence is due to the company’s unique cooperative business alliances which allow for the accelerated marketing of its Clean Plus® product line across national borders, marketed by networks of leading distributors in each country.
In another sign of the company’s growing success, in 2012 the company plans to more than double its production capacity in Europe for its biodegradable product line. With this expansion, Falken Industries is poised to become an industry leader in the biodegradable and bio-based products market, which is growing by more than 20% annually.
Key Investor Points
● Falken Industries sales volumes have doubled over the past two years, with continued record growth: Q1 2012 revenues have increased 30% over Q4 2011 along with record profits.
● The Company is experiencing impressive expansion, including a number of recently signed agreements distribution agreements.
● Clean Plus® products are available in Canada, Ireland, France, Malta, Cyprus, Finland, Sweden, Norway, Iceland, the United Kingdom, Belgium, The Netherlands, Denmark, Greece, Estonia, Romania, and India, where the company contemplates opening another production facility in 2012. It is present in other markets which it classifies as “Export”, limiting marketing and sales support functions.
● Falken Industries supplies the global markets of major petrol distributors, including Shell, BP, Esso, Q8, Statoil, Hydro-Texaco, Olis, Agip, and Cepsa.
● Falken Industries is an environmentally conscious company, prioritizing their efforts to develop energy efficient and eco-friendly alternatives. The company is the recipient of trade awards for innovations, biodegradability, as well as environmental and health quality standards.
Rock Solid Fundamentals Let’s face it: most penny stocks trading in this range have very little value; they typically lack revenue, products, or discernible business operations. FLKI is a rare exception: a solid OTC company with real revenue. And with a market cap of only $5 million in a $1 billion market for cleaning products, the potential for growth is enormous.
Falken Industries continues to rack up impressive revenue consistent with its steady rise in performance over the past few years. John David, one of the nation’s most respected analysts on the automobile aftermarket industry, describes the company’s fundamentals as “beyond reproach.”
Revenues and profits are expected to continue to rise throughout 2012. Operating margins should widen throughout the year due to the expected increases in volumes and the related improvement in fixed cost coverage.
In addition, recent 4Q earnings per share were a record 1 cent, representing a 25% + valuation on the current share price. John David notes: “Most on the street say it’s a great buy and some have rated Strong Buy,” concluding: “the company at its present quote is, in my view, obviously considerably undervalued.”
Why Now? Despite record impressive performance and profits, Falken Industries is trading at a heavy discount at: 30% of its book value. This anomaly is largely due to the current economic downturn in Europe, which has affected exchange rates between the Dollar and the Euro. Since the company’s financial reports are primarily denominated in Euro, the monetary figures are artificially diminished as a consequence of U.S. Dollar reporting. This has undeservedly fueled investor’s concerns.
Falken management has responded with initiatives designed to capitalize on the weaker Euro and stronger Dollar by expanding into US and Canadian markets. The trade-off is huge, offsetting by far any currency conversion loss. It is only a matter of time before the stock begins to reflect the fact that its products have up to a 50% price advantage over competitors. In Europe, the crisis has enabled unprecedented market share expansion for the company.
All this presents, in my view, a unique opportunity for investors to buy at an artificially low PPS before the inevitable adjustment of the currency exchange rates reveals the true strengths of this rapidly growing company.