During this week’s Value Line update, we mentioned that MSC Industrial (MSM) seemed to exhibit strengthening fundamentals. The company shows up near the top of a screen based on the low total return forecast and actually scores pretty well when factoring technical elements, too.
Time for a closer look. Tighten your tool belts and let’s go!
Company Description
Make sure you start with a pretty big tool belt.
Since 1941, MSC has set the industry standard for quality, selection and customer service. More than half century later, the company’s dedication to these standards has made us one of the nation’s leading distributors of metalworking & maintenance/repair/operation (MRO) industrial supplies, with over 500,000 products.
As Ken Kavula often encourages, check out the presentation under investor relations for a quick overview and discussion of where the company has been … and where they appear to be going.
Business Model Analysis
Expectations for top line growth seem reasonable in the 9-10% range.
The historical profile shows recessionary impact pretty dramatically for 2008-2009.
Profitability Analysis
Return Forecast
Using a growth forecast of 9%, a net margin forecast of 10.7% (based on history and analyst consensus estimates) and a consensus-based projected average P/E of 18.0x, the projected annual return (PAR) is approximately 12%.
Expecting Alpha 
[…] MSC Industrial Direct (MSM) markets industrial products to small- and mid-sized customers throughout the U.S. MSM distributes a full line of industrial products such as cutting tools, abrasives, measuring instruments, safety equipment, fasteners, welding supplies and electrical supplies. Like Grainger (GWW), the company has been a long-time favorite and is worthy of further study — a good opportunity if you believe in a continuing economic recovery. […]