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Core Molding Technologies: Q3 FY23 Results and Market Analysis

2023-11-14 08:06:33.236000

Core Molding Technologies reported a 14.6% decrease in net sales for Q3 2023, but operating income increased by 26.8%. The company's free cash flow for the first nine months of the year was $19.3 million, and net debt decreased to $10.1 million. The market capitalization has decreased, but the author believes the market has overreacted. The company specializes in molding thermoplastic and thermoset structural products for various industries. The business has a good moat and high barriers to entry. The company's net sales decreased due to lower tooling project sales and lower demand from certain markets. However, operating income grew thanks to efficiency improvements and declining raw materials costs. The company has strengthened its balance sheet and plans to execute an acquisition in 2024. The author believes the recent selloff has created a buying opportunity. However, there are downside risks, including a potential decrease in demand in the truck market and the reliance on a few major customers. Overall, the author believes the company has a strong balance sheet and a decent margin of safety.

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