NEW YORK (TheStreet) -- With less than 300,000 shares traded per day, and only three brokers covering the company, CLARCOR (CLC) , a maker of air and liquid filtration systems, doesn't get much media coverage. But its shareholders, who have seen their investments more than double over the past decade, aren't complaining.
Clarcor, headquartered in Franklin, Tenn., reports fiscal first-quarter results Wednesday after the close. And while the filtration business isn't particularly sexy, it has been fairly lucrative. Take a look at the chart.
Investors have profited from Clarcor's diversified business, which also offers stable recurring revenue from its aftermarket segments. As of the most recent quarter, 80% of its annual revenue of $1.5 billion came from recurring business. And, with its engine-mobile and air filtration segments accounting for 40% and 30% of its revenue, respectively, Clarcor doesn't rely on any single business segment to pull all the weight.
The engine-mobile business, which provides filtration products for oil, air, fuel, coolant and transmission fluids in trucks and construction equipment, has an estimated market size of $14 billion, according to Clarcor's projections. And the company projects its process/liquid filtration business has plenty of room to grow within an estimated $12 billion market, buoyed by higher demand in areas like aerospace, transportation and oil drilling.
All told, Clarcor, which has over 90 facilities operating in almost 20 countries, has a balanced business. And given that the company generates annual revenue of only $1.5 billion, it has plenty of room for growth, given its two largest segments have a combined $26 billion market. The question is, can Clarcor execute?
With earnings and revenue up 32% and 38%, respectively, in the most recent quarter, Clarcor has shown execution is not a problem. And this is despite headwinds caused by plunging prices for oil and gas, industries Clarcor relies for roughly one-sixth of its annual revenue.
For the quarter that ended in February, the company is expected to report earning 53 cents per share on revenue of $354.8 million, translating to 10% and 13.5% growth, respectively. For the full year ending in November, earnings are projected to climb 14% to $3.22 per share, while revenue is seen coming in 8% above last year to $1.63 billion.
In short, despite shares trading at near-52 week highs and a price-to-earnings ratio of 23 (two points above the average for companies in the S&P 500 index), Clarcor still offers compelling value, based on its growth projections. Combined with its 20 cent quarterly dividend, yielding 1.2%, and averaging analysts' 12-month price target of $77 (more than 17% above its current price), investors should consider buying shares ahead of Wednesday's results.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.