A Short Term Buy: Air T Incorporated
As the holiday season approaches with the price of crude oil remaining relatively low juxtaposed to prices reported last year, such may be a good opportunity to purchase shares of transportation companies in attempt to gain some extra profit from the unexpected support of this dependent commodity. While I am typically not in favor of purchasing any shares in industries where too much is holding on dependent factors, in the case for Air T Incorporated (AIRT), I believe there is a chance to accumulate a nice sum of capital gains come spring time. As I mention this small cap stock, you may be wondering why I am not picking a well known company situated in the same sector, air and freight services, such as FedEx or UPS. While both of these companies are excellent in terms of what they do, more than likely, individuals are going to view these stocks more as long term investments rather than a short speculating session. Such can be a positive indication as what does interest me of Air T in relation to the other two giant firms is their relative P/E ratio. While FedEx and UPS have posted pretty solid numbers in the 10-20 range, what I notice about Air T is its ratio currently of 9.41. For a company in such an industry, such a price is relatively low to its competitors and might signal a strong boost in terms of its share price in the near future. Come early 2007 when Air T announces its earning results coupled with a possibly strong holiday sending session, you should see the share price of Air T, which already is near its 52 week low, prop up to amazing levels. While the same logic can be said about FedEx or UPS as they all utilize the same procedures to obtain profit, because Air T is near such a low but still remains to keep a strong P/E ratio, I believe this company has reached its support level and has no other option but go up in terms of share price. When looking at more concrete information, Air T has done pretty solid when it has come to fundamentals. It’s true that operating income has not increased from year to year at a rate favorable to many investors, but nevertheless, revenue growth still has been strong which supports the strong earnings, and liabilities have been decreasing at a rate faster than the more valuable total assets. Trend wise, Air T has remained relatively flat for the previous few years. Nonetheless, my suggestion for purchasing shares of this stock remains as a short term investment (until a good few day rally), as I do not believe this stock will remain as productive when oil prices return to their respective highs. In the short term however, because this stock is a small cap equity with low volume and because this stock has a history of being volatile in many situations, I would encourage purchasing shares now to take advantage of the low commodity prices and the holiday shopping season. Both of these factors will have tremendous benefits to not only the fundamentals of this company but to its relative share price value as well. Therefore, while a better long term investment may rest with companies such as FedEx or UPS due to their relative stronghold and stability, if you, as an investor, are looking for a short term purchase with a high risk but higher reward, look no further than purchasing Air T. With a strong P/E ratio along with fairly positive economic and seasonal indicators, at such a price, regardless if the company will buy back its stock or not, this stock will be enticing for any investor to stimulate his or her capital gains to the upside. Dennis Biray presents advice on all kinds of topics ranging from finance and investing to fitness to sports. For more information email him at dbiray@gmail.com, or to view other articles written by him visit http://www.biraynetworks.co.nr |
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