After the shareholder recently recommended this share, I ventured a deep dive on this company, which I would like to share with the community here.
This is my first post and I look forward to constructive feedback.
TLDR:
From a value investor's perspective, Lubawa SA offers an interesting combination of solid growth, attractive valuation and financial stability. However, investors should take into account the dependence on the defense sector and possible price fluctuations.
Company profile
Lubawa is a Polish company specializing in the manufacture of textile products, particularly for the defence sector. Its main products include protective vests, tents and other military equipment. The company benefits from the increasing demand for defense products in Europe, especially in Poland, which has increased its military spending due to geopolitical tensions.
Key financial figures
Lubawa has recorded strong sales and profit growth in recent years. Sales increased from PLN 377.6 million in 2023 to PLN 534.75 million in the last twelve months (source: company reports). Net profit more than doubled to PLN 112.35 million in the same period. Profit margins are around 21%, which indicates a high level of efficiency.
Despite a share price increase of over 110% since the beginning of the year, the company's valuation still appears moderate. The price/earnings ratio (P/E ratio) is 12.77 (trailing) and 8.17 (2023), while the EV/EBITDA ratio is 4.28 (source: stock market data from Stooq and Investing.com). These key figures indicate that the share is valued favorably compared to its growth potential.
Balance sheet quality
Lubawa's balance sheet is solid. The company has a net cash position of PLN 93.45 million (source: company reports). Debt is extremely low with a debt-to-equity ratio of just 0.01. Liquidity ratios such as a current ratio of 2.89 and a quick ratio of 1.90 underline the company's financial stability.
Growth prospects
Lubawa benefits directly from rising defense spending in Europe. According to NATO forecasts and Polish government reports, Poland is expected to further increase its military spending by 2030. This creates a favorable environment for companies like Lubawa that work closely with government clients.
Risks
The dependence on the defense sector represents a significant risk. Political changes or cuts in military spending could have a negative impact on business development. In addition, the sharp rise in the share price could lead to an overvaluation in the short term.
Sources: Lubawa company reports, stock market data (Stooq, Investing.com), NATO reports on defense spending