The company supplies high-end security paper to central banks for the purposes of supplying currency. As central banks attempt to stimulate their economies by printing currency, Fortress Paper has benefitted, as its security-paper segment operates at full capacity.
Despite the strong outlook, the company trades with a P/E of just 6 and a P/B under 1. The company has managed to stay profitable throughout the economic downturn, and does so with a current cash balance of $19 million (compared to its $70 million market cap).
Growth mongers will love the fact that the company is considering tripling its capacity for security-paper, but value investors may see this as a reason to proceed with caution. An increase in capital expenditures of this magnitude is always a risk: large sums of cash are diverted away from shareholders in exchange for uncertain returns.
While the company does generate good returns on equity, it has a short record as a public company, having IPO'd in 2006. For those who believe strongly in its growth story, this represents a terrific buying opportunity. For those of us who would rather see a stronger track record along with a less uncertain future, Fortress Paper certainly qualifies as worthy of keeping an eye on.