Despite an already hefty 90% gain in market value of AFG Industries Inc. stock so far this year, some untapped value remains in shares of the Irvine glassmaker, say Wall Street analysts who follow the company.
Through year-end, said one analyst, the price of AFG's stock could increase by an additional 25%.
Frequently found these days on the New York Stock Exchange's list of new 12-month highs, AFG's increase in market value since the beginning of 1986 is almost three times the 35% gain recorded for all of 1985. Yet, unlike many stocks in this bull market, which peak on sharp run ups, AFG has crept upward, quietly but surely.
On Jan. 2, AFG closed at $25.25 a share in over-the-counter market trading before climbing to close at $36.625 a share on April 11. The following Monday, April 14, AFG split 3 for 2 and moved from the over-the-counter market to the NYSE. Since its April 14 closing price of $25.875 a share, AFG has increased another 25.6% to close Thursday at $32.50 a share, up 62.5 cents from last week.
"You begin to wonder where the hell the top is on it," said Larry Selwitz, who follows AFG for the investment firm of Bateman Eichler, Hill Richards Inc. in Los Angeles.
For a young company--AFG was formed in 1977 from the remnants of two failed glass companies--AFG has chalked up impressive growth. Today it is the nation's fourth-largest glass manufacturer, with an 18% share of the domestic market. In the construction glass segment, AFG holds a substantial 24% share of the market.
And, as shareholders anticipate receiving their first regular 4-cent-a-share dividend this month, AFG officials confidently predict that 1986 will mark the company's eighth consecutive year of increased profits. In all, net earnings are expected to grow 45% to 50% above last year's $21.2 million, they say.
Because of the rosy prospects, AFG could climb to "close to $40 a share," said Joan Towles, who follows the company for the Atlanta investment firm of Robinson Humphrey/American Express.
"This assumes, of course, that the market will continue to climb, or at least stay the same," she said. "But given a continuing strong market, I wouldn't be surprised to see it there within six months."
But there are still a few risks, the analysts caution.
In particular, AFG would be hurt by an economic slowdown, although a drop in housing starts probably would not affect AFG as severely as other companies, Towles said. During 1983, when housing starts were at a post-war low, AFG still posted 30% earnings growth, she noted.
Selwitz, of Bateman Eichler, warns that should the market turn bearish, AFG could be vulnerable to sell-offs. Consequently, he is telling his clients to minimize their risk with a stop-loss of $28 a share.
"A lot of people have profits in this stock," Selwitz said. "If the market goes down, people are going to get their profits out."