Description

Great call by Round...I think there is more left here; enough to beat the market with nore safety. And like SJT I find this cheap enough in a market I don't love, to merit investment for smaller accounts. See Round's excellent write up for further background:

Span-America Medical Systems, Inc. engages in the manufacture and distribution of various polyurethane foam products for the medical, consumer, and industrial markets in the United States and Canada. Its medical products consist of polyurethane foam mattress overlays; therapeutic support surfaces, which include non-powered and powered therapeutic support surfaces; seating items; and Selan skin care creams and lotions for health care, including acute care hospitals, long-term care facilities, and home health care providers. The company offers pressure management products, including Geo-Matt, PressureGuard, Geo-Mattress, Span-Aids, Isch-Dish, and Selan products. Its consumer product line consists primarily of contour-cut mattress overlays, and pillows for the consumer market. Also an industrial product line includes foam products used in various industries, such as sports equipment, automotive, photographic film, durable goods, and electronics industries.  

Conservative company with no debt, a dividend, and differentiation from competitors who compete on price. Differentiation is aided by by their strong distribution chanel, low cost manufacturing processes, and well regarded customer service. 

THe decrease of 6% in FY 09 salws (55.9 vs. 59.3) was due to lower volume in the private-label supply area with a concentrated customer accounting for nearly $7mm. Net I was down in 09 to $1.67 compared to $1.7 impacted by lower sales primarily (SG&A went up slightly, but were largely offset by lower manufacturing costs)

SPAN trades at significant discount on a P/E basis...say 10x versus an industry average of approximately 23x. ROE and Net Profits are also very sound. The dividend is no small beer (though no large beer either), and yet over the last two decades they have returned nearly $8.5 per share in dividends. 

Some numbers:

2006 Fiscal year 2007 Fiscal year 2008 Fiscal year 2009 

Assets 31,012,000 23,969,000 24,113,000 26,834,551 

Liabilities 6,495,000 10,181,000 6,780,000 6,261,211 

Equity 24,517,000 13,788,000 17,332,000 20,573,340 

Revenue 51,557,000 60,689,000 59,265,000 55,867,000 

Net profit 3,055,000 2,874,000 4,869,000 4,684,031 

EPS 1.10 1.00 1.70 1.67 

Financial Ratios 

ROA 10.66% 9.27% 20.25% 18.39% 

ROE 13.26% 15.01% 31.29% 24.71% 

Net profit margin 5.93% 4.74% 8.22% 8.38% 

Catalyst