A company shouldn’t get addicted to being shiny, because shiny doesn’t last.Jeff Bezos
First thing first, never rely CapIQ on any calculation. I was on an onerous journey of finding out a good LBO candidate for a case competition. And GrafTech popped up as a low P/E company on finviz. The next step for a lazy person like me is to glance over the financials on Capital IQ.
It goes without saying that cash is king in the investing world. So, I habitually found my way to the section that shows cash flows:
Despite some hiccups, the FCFs look decent to me — at least they are all positive. However, in a more conventional way, if we just eyeball the cash flow statement, we can get a sense of the company’s FCF in a not-so-misleading way by simply subtract CapEx from the Operating Cash Fl0w:
Clearly, the company has yielded little to even negative FCF in some time period. And volatility of the cash flow growth rate makes the company unattractive to a PE investor wannabe. Had I not been so lazy, I would have not spent time reading about the business.
The company has been doing carbon related business since 1870s. Currently, GrafTech is a pure play manufacturer of graphite electrode, an un-substitutable input for Electric Arc Furnace (EAF) steelmaking. The company is the only vertically-integrated graphite electrode manufacturer in America, owning the second-largest petroleum needle coke producer in the world. Petroleum needle cokes are raw materials for graphite electrodes.