KHD Humboldt Wedag: An Undervalued Winner

KHD Humboldt Wedag International (KHD) is probably the most under appreciated stock I know. This is a company in an essential industry, providing its service and products in the fastest growing parts of the world.  It has a growing backlog of orders and excellent margins. It also sits on a pile of cash that is half the market capitalization. Yet the stock sits near the bottom of the 52 week trading range. Later I will give my thoughts on why the stock is so undervalued. First, a recap of some numbers comparing the 2nd quarter of 2008 with the same quarter of 2007.

• Total revenue: $144 million, down 9%.
• Net income: $19 million, up 88%.
• Income per share: 63¢, up 85%.
• New orders: $320 million, up 105%.

• Order backlog: $1.3 billion, up 96%.
• Cash and cash equivalents: $445 million up $220 million.

Do not worry about the decreased revenue, the company is still well ahead of 2007 for the first 6 months of 2008 and has been able to increase its gross profit margin by over 4% to 19% in the last year.