(ARII) - The stock is quite cheap given its strong growth prospects - low PEG ratio of 0.45

American Railcar is enjoying the fruits of a strong backlog and increased production. Over the past month, earnings estimates have been on the rise. This year's numbers have increased 6% to $1.95 per share, while next year's estimates have risen 5% to $2.31 per share. Full Analysis American Railcar Industries, Inc. (ARII) provides railcars, railcar components, railcar maintenance services, and fleet management services in North America. It manufactures covered hopper and tank railcars. It also designs and manufactures railcar and industrial components used in the production of its railcars, and railcars and nonrailcar industrial products produced by others. The company's components comprise hitches, tank railcar components and valves, discharge outlets for covered hopper railcars, manway covers and valve body castings, and outlet components and running boards, as well as aluminum and special alloy steel castings. In addition, it offers railcar repair and refurbishment services through a network of six full service maintenance and repair facilities, and four mobile repair units, as well as provides fleet management and engineering services. As of September 30, 2005, the company managed approximately 57,000 railcars for various customers. In early-August, the company reported earnings that surpassed expectations by almost 9%. After paying preferred dividends, earnings grew to $10.8 million, or 51 cents per share, from $1.9 million, or 17 cents per share, in the year-ago quarter. Analysts had expected 47 cents per share. ARII also said its backlog stood at 12,790 rail cars at June 30, up from 6,425 a year ago. Its Marmaduke plant resumed operations on Monday and is expected to reach capacity production rates by the end of the third quarter. For the six months ended June 30, 2006 revenues were $330.3 million versus $291.6 million for the comparable period of 2005. Revenues for 2006 were reduced by the tank railcar manufacturing plant being under repair for the entire quarter, but still exceeded the prior year due to strong growth in covered hopper railcar production, and growth in the railcar services business. "The Company had a very strong quarter, even though our tank railcar manufacturing plant was undergoing repair. The covered hopper railcar plant set a new production record with 1,649 railcars shipped in the quarter," said James J. Unger, President and CEO of ARI. "Our substantial backlog of unfilled orders for new railcars totaled 12,790 cars at June 30, 2006, and was almost double the 6,425 railcar backlog of one year earlier. Our Marmaduke plant has resumed operations this week and we expect to see production steadily increase and reach capacity rates by the end of the third quarter. We expect the third quarter to be strong with good operating rates for covered hopper railcars and further payments from our business interruption insurance for our tank railcar manufacturing plant, as production at that plant increases to capacity production rates. The fourth quarter is expected to be very strong, with both railcar assembly plants expected to be operating at capacity levels by the beginning of that quarter." Over the past month, earnings estimates have been on the rise. This year's numbers have increased 6% to $1.95 per share, while next year's estimates have risen 5% to $2.31 per share. The stock is quite cheap given its strong growth prospects. ARII is currently trading at 12.3x next year's estimate, well below the projected long-term growth rate of 27.55%, giving the stock a low PEG ratio of 0.45. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. This important indicator is updated daily on Zacks.com and is available to Zacks Premium subscribers. As such, it is prudent to check the site for the latest Zacks Rank on the stocks highlighted in this section. Simply click the link for the stock or enter the symbol in the ticker entry box in the upper left hand corner of the web site. Content Courtesy: Zacks Investment Research #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions. | Blog Home| VitalStocks Home