Why American Railcar (NASDAQ:ARII) Has Potential To Keep Rising

On July 23, 2014, the stocks of American Railcar Industries, Inc. (NASDAQ:ARII) were up by 4.46 percent and reached the figures of $70.71. The increase in the stock prices resulted when the U.S. government announced the up gradation of the trains for better security and safety. The railroads carrying crude oil and other inflammable liquids like ethanol will be phased out by the government in order to implement the new safety measures into those trains. Rumors have it that hundreds of these tank cars, DOT-111, will either be repaired or replaced completely.

The ratings team at one of the leading analyst firms of the market, gave the company a rating of ‘buy’ with an overall score of A.

The team further said that the ratings were derived by the positive factors and strengths of the company. American Railcar Industries, Inc. (NASDAQ:ARII) has a positive investment strategy with solid share prices and notable EPS (Earnings per Share). The company’s net income and returns on equity are also on a rise. Moreover, the company’s debt level is reasonable. Though the company has shown weak performance in the net operating cash flow, but the strengths of the company outweigh this slight weakness.

Highlights from the report:

The company’s stocks have increased by 96.01 percent over the last year. Such a huge increase has surpassed the S&P 500 index. Although the company has seen a huge growth over the last year, market analyst firms are of the opinion that the stocks will rise further.
Coming to the EPS of American Railcar Industries, Inc. (NASDAQ:ARII), the company’s EPS for the recent quarter has increased by 15.5 percent when compared with the figures of the same quarter a year back. Moreover, the company’s earnings are on a positive track for the last 2 fiscal years. Analysts are of the view that the earnings will continue to rise. The company’s EPS for the last year was $4.07, almost 150 percent of the prior year’s EPS of $2.99. For the current year, market research firms are expecting an EPS of $4.48.
Coming to the net income of the company, the company’s growth rate has surpassed both the S&P 500 rate and the industry average. The company’s net income reached to $20.77 million; an increase of 15.8 percent can be seen when the figures are compared with the numbers of the same quarter a year ago.
American Railcar Industries, Inc’s (NASDAQ:ARII) debt-to-equity ratio is currently at 0.71. This ratio is less than the industry average ratio and can be considered quite low. Such a low level indicates that the company’s management is strong. Moreover, the company’s quick ratio is recorded to be 2.10, which indicates that the company will be able to handle all the short term cash needs.
Coming to the ROE (returns on equity), the company’s ROE has increased slightly if the figures are compared with the prior year’s figures, which can be seen as a slight strength of the corporation. The company’s returns on equity are far greater than the S&P 500 as well as the industry average.