As the markets continue to waffle, perhaps the astute investor should be looking for opportunities. There are companies muddling through a slower cycle and happy to be doing so as their brethren falter. Finding those companies that are moving through the current cycle with less difficulty usually indicates a product and management structure that is more resistant to cycles and ready to be expanded into a more diversified company as conditions improve. These types of companies are far and few between, but can lead to a nice long term profit if developed and cared for in the right way.
Lappola Industries Inc., a spray foam and coatings manufacturer and distributor, works to manufacture and distribute spray foam and coating insulation products to commercial/residential building owners and contractors. The company reported stable to slightly increased results during the third quarter.
Not all construction related products are experiencing slower growth in the later part of 2008. There are, in fact, many products that are finding increased sales as a result of slower economic conditions. Energy saving products are one such product class that are experiencing slow to moderate growth as consumers and building owners come to understand that reducing energy costs, by spending a little, is a wise investment.
Lappola Industries appears to be in the right place at the right time and is quickly capitalizing on this understanding. In the third quarter 2008, the company reports that sales increased to $13.4 million from $8.4 million Q3 2007. From all appearances, this trend is likely to continue as consumers and building owners come to understand that these foam and coating products are somewhat superior to traditional batting insulation products.
Although traditional batting insulation will remain a standard for many applications of insulation, foam spray and coating products are quickly becoming the norm for insulation applications where tight spaces limit battings’ effectiveness. The sprays can also be used in more open applications, such as between joists, but their use in tight locations, such as stud-to-window, is where they excel.
The company is the leading distributor and servicer of its products across the country. It takes pride in the fact that its reach is designed to provide exceptional product sales and service across large geographic areas. One does wonder, however, if the company is missing an opportunity with this distribution network of warehouses and support services when others may be experiencing less ability to service existing customers in other building trades. Although capital is surely tight, expansion with this backbone of warehouse and service personnel may be an interesting opportunity when others are finding lack of direction.
Although purely speculative, perhaps an investor with designs on the future may be interested in Lappola Industries as building activities begin to exit the current down economic cycle – given their apparent economic health in a time of “crisis.”
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