Singular Research: Time To Buy Haynes International - Haynes Intl (NASDAQ:HAYN)

Shares of Haynes International, Inc. HAYN have lost nearly 22 percent year-to-date, but were almost 5 percent higher on Tuesday.

Lisa Springer of Singular Research initiated coverage of Haynes on Tuesday with a Buy rating and $48 price target.

Sprint noted the company has already shown improvements in product mix, higher selling prices and an improved aerospace market.

Shares of Haynes International, a manufacturer of high-performance alloys, have lost nearly 22 percent year-to-date due to the company's clients who are cyclical in nature and the company's geographical exposure to weaker economies including Europe (22 percent of revenue) and China (8 percent of revenue).

In a report published Tuesday, Lisa Springer of Singular Research initiated coverage of Haynes with a Buy rating and $48 price target.

The Initiation

According to Springer, Haynes has seen a 10.5 percent revenue growth due to an improved aerospace market, while its backlog for commercial aircraft builds are at record levels. The company's improved performance is attributed to its market leader status in developing "technically advanced" super-alloys (19 U.S. patents and 200 foreign patents) that are demanded by the aerospace sector, along with the chemical processing and land-based gas turbine industries.

Springer continued that Haynes has already invested $74 million in manufacturing and IT system upgrades that are expected to benefit the company with a 40-plus percent ROIC and 200 to 400 basis point gross margin improvement. In addition, the company's network of service centers differentiates itself from the competitors, strengthens customer relationships, accelerates response times and facilities cross-selling of other higher-margin services.

Finally, the company's financial positioning is attractive with "minimal" debt, "solid" cash flow and access to a $120 million credit revolver it can utilize to fund acquisition-related growth.

The Bottom Line

Looking forward, the analyst is estimating the company will earn $2.61 per share in fiscal 2015 (on 8.3 percent revenue growth) and $3.29 the following year (on 10.6 percent revenue growth).

Moreover, the analyst is expecting the company's gross margins will improve from 10.4 percent in fiscal 2014 to 19.4 percent in fiscal 2015, and 20.1 percent the following year due to completed capital expenditure projects and production efficiencies on higher volume.

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