has it really been 4 months since I posted about a stock that Craig might actually like?Man am I overdue to contribute here.Aceto Corp (ACET)what they do:Aceto Corporation, together with its subsidiaries, engages in sourcing, quality assurance, regulatory support, marketing, and distributing chemically derived pharmaceuticals, biopharmaceuticals, specialty chemicals, and crop protection products. It operates in three segments: Health Sciences, Chemicals and Colorants, and Crop Protection.The Health Sciences segment offers active ingredients for generic pharmaceuticals, vitamins, and nutritional supplements, as well as products used in preparing pharmaceuticals primarily by drug companies and biopharmaceuticals. The Chemicals and Colorants segment offers specialty chemicals used in plastics, resins, adhesives, coatings, food, flavor additives, fragrances, cosmetics, metal finishing, electronics, and air-conditioning systems. This segment?s products include dye and pigment intermediates, which are used in the color-producing industries, such as textiles, inks, paper, and coatings; and organic intermediates used in the production of agrochemicals. The Crop Protection segment provides herbicides, fungicides, and insecticides that control weed growth, as well as control the spread of insects and other micro organisms that damage plant growth. This segment also offers a sprout inhibitor for potatoes and an herbicide for sugar cane. Aceto Corporation serves a range of companies in the pharmaceutical, agricultural, color, surface coating/ink, general chemical consuming, and health science industries in the United States, Europe, and the Asia-Pacific. The company was founded in 1947 and is headquartered in Lake Success, New York.(from yahoo).A chemicals company! I do not believe we have any of those yet (save Gushan). They have a huge selection of products for such a small (yet old company) My main interest is exposure to Ag provided by their crop protection segment, but I like the mix a lot.What these guys do is they make generics (I really like this aspect) and target expiring patents. Talk about a low risk strategy! That's one way to keep R&D expenses in check.Macro/Sector outlook:Food and Heath are pretty slid segments. And while there will be dips in demand it's pretty safe to say there will be more people in the future eating food. Also with the greying of America health exposure could be a plus.the chemical and colorants division could benefit from a turnaround and is the mots likely to be negatively impacted by a protracted slowdown.The fact they have three segments should give them insulation and time to adjust to dislocations in any one of them. Their Crop division is growing rapidly while they are experiencing competition and revenue loss in health sciences.the crop division is much smaller than the others, they only have two generics in there right now including their latest product HalosulfuronThey have just entered the Japanese market and appear to be focusing their efforts abroad.most of their products are made in china and India, so probably aided by Us dollar inflationThe Numbers:Price:6.32Market CAP 159.26 millionTrailing P/E 10.21PEG- 0.46 according to FinvizROE is low but it's growing last three years. 8.30% 8.51% 10.16% 11.37%-projected Revenue growth has been choppy (5.2%) 5.5% 14.7% (18.8%). As you can see they took a hit last couple quartersgross margin is extremely thin, usually runs in the middle to upper teens.P/B 1.14P/S 0.45The also have over a 1.5 worth of cash per shareDividend 3.10% yield (32% payout ratio)Debt to Equity 0.05 (they just took on a tiny bit of debt)accounts receivable show no significant increase.Techinal Analysis:Basically bearish. Broke a major multi year uptrend and has treaded water ever since. Bollinger bands suggest it's oversold a little.Risks/Rewards:Management's comments give me a lot of confidence that Aceto knows what they are facing and will be adequately prepared to handle it. However management was also smart enough to dump shares last winter. This year all the insider activity has been bullish, but it's still less than what was sold.Obviously given their thin margins any further significant declines in revenue could put into a loss position without cost reduction (layoffs etc).Their divisions can be a curse of blessing, in this case I think it's blessing as it allows them to smooth out recession driven bumps. The Crops division looks very promising.However Health Sciences still accounts for 58% of sales, so that's the one to watch. (crop protection is mere 5% at this point).Given the lack of debt price relative to Book value and cash on hand I think Aceto is cheap but not super cheap. Their last two quarters have had negative sales growth ,and the next one may face unfavorable comps as well so it might be wise to hold off purchasing until this winter.There is only one analyst covering the stock, which calls the forward estimate into question.what's really attractive is this stocks is trading at about half the ratios of its peers and it appears to be a sound company.What these guys do is they make generics (I really like this aspect) and target expiring patents. Talk about a low risk strategy! That's one way to keep R&D expenses in check.However the manufacturing is actually outsourced so they dont have complete control over the supply chain.No customer/supplier over 10% of salesno patentsI find it a bit odd they refer to their products as "an herbicide for sugar cane " etc. and don;t sue the brand name in their releases.sounds like the workforce might unionized, that could be troublesomeThey have had to do environmental cleanup at one of their acquired subsidiaries and may have to do moreThey have a decent dividend at a very manageable payout ratio with a decent history of increases.I like the fact their company name and ticker begins with A, I have read studies suggesting stocks that are listed near the beginning of newspaper stock tables (the A's basically) outperform since more retail investors see them.their stocks' past performance is pretty lackluster so management has not done good job realizing value for shareholders yet.ACET is a five star in CAPS with only two allstar underperforms. and little CAPS commentaryTasty's Final Take:You might want to wait a quarter or two to see if they can stop the descent here, but I think this company is pretty safe play. They are financially sound and I like their industry exposure, age, product breadth and management. I think they do have good growth prospects and the valuation is decent. They are very cheap compared to their peers.I'd rate it a buy with an expectation of a possible double within 3-5 years.I'm surprised how much like it actually.Criticism or any other thoughts always welcome (especially if you have anything to say regarding their products/competitive advantage)
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