Shares of Colombia-based architectural glass maker Tecnoglass Inc. NASDAG: TGLS were trading at the high end of a buy range on June 30, but given analysts’ enthusiasm for the stock, there should be plenty of actionable opportunities ahead.
Technoglas may not be a household name, but its strong earnings growth and consistent price appreciation since late last year make it watch-list worthy. This under-the-radar stock exemplifies the potential for investment opportunities that often go unnoticed.
In this case, its small market capitalization of $2.458 billion means the company doesn’t have much analyst coverage. That fate can be magnified for stocks based outside the U.S., even for a company like Tecnoglass, 90% of whose sales come from U.S. customers.
In mid-May, Technoglas stock began retreating from a high of $49.06. It pulled back below its 50-day average, but didn’t settle there long, rebounding back above that line the week ended June 16.
Stock Gapped Up on Dividend Announcement
Technoglas stock gapped up 8.85% on June 15, the same day the company announced its quarterly dividend of $0.90 a share. MarketBeat’s Tecnoglass dividend data show the company increased its payout for the past three years.
While many domestic small caps focus on growth rather than returning capital to shareholders, the situation outside the U.S. is different. In many non-U.S. markets, there’s a stronger tradition of dividends, and shareholders demand that even from new, small companies, like Tecnoglass, which went public in 2013 via a merger with a special acquisition company, or SPAC.
No Crash & Burn After Hindenburg Report
Tecnoglass stock shattered in December 2021, as short-seller Hindenburg Research published a report alleging cocaine cartel connections, undisclosed family deals, and accounting irregularities.
Following those potentially damaging allegations, the stock muddled along for nearly a year, finally rebounding in November 2022, following a better-than-expected quarterly earnings report. At the time, the company also announced a $50 million share repurchase program.
Is it possible that the company announced the share repurchase with the primary aim of boosting stock price, rather than primarily to return capital to shareholders? Sure. Whatever the reason, Tecnoglass shares are up 164% since then.
There doesn’t seem to have been much long-lasting fallout to the company from the Hindenburg report, although immediately after its release, several law firms attempted to initiate class-action lawsuits.
Analysts Remain Bullish
All that is just a distant reflection now, as the handful of analysts who cover the stock are all bullish. According to MarketBeat’s Tecnoglass analyst ratings, the consensus view is “moderate buy.”
Tecnoglass makes and installs architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries. It supplies over 1,000 customers in North, Central and South America, with the U.S. accounting for 96% of revenue.
When it comes to shipping its materials to the U.S. from its factory in Colombia, Technoglass takes advantage of the trade imbalance to manage costs. As you might imagine, a greater number of containers loaded with goods comes from the U.S. to Colombia, rather than the other way around.
Negotiating Favorable Shipping Costs
But that’s where Tecnoglass has an edge: It can negotiate low shipping costs for containers and vessels that would otherwise return to the U.S. empty.
“We are therefore able to distribute our products to the eastern, southern and western regions of the United States at very attractive rates, which are often lower than a domestic land shipment within the United States,” the company said in its most recent annual report.
It added that demand for its high-specification architectural glass is typically highest in large coastal cities, where it can ship directly, while most of its competitors use relatively expensive land transportation services to deliver finished goods to these sites.
Construction Materials In High Demand
Tecnoglass is part of the building and construction products industry within the materials sector, which has been a leading industry, in terms of both price and earnings performance, in the past six months. Factors including infrastructure spending and the ability to charge higher prices due to demand and higher input costs are driving the recent growth.
Tecnoglass’ revenue has grown at double-digit rates for the past eight quarters. Earnings grew at double- or triple-digit rates during that time. Analysts expect the company to earn $4.14 per share this year, an increase of 25%. That’s forecast to grow by another 10% next year.
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