The L.S. Starrett Company (SCX) | Investment Case

1. Company Snapshot

1.a. Company Description

The L.S. Starrett Company, together with its subsidiaries, manufactures and sells industrial, professional, and consumer measuring and cutting tools, and related products in the United States, Canada, Mexico, Brazil, China, the United Kingdom, Australia, and New Zealand.The company's products include precision tools, electronic gauges, gage blocks, optical vision and laser measuring equipment, custom engineered granite solutions, squares, band saw blades, hole saws, hacksaw blades, jig saw blades, and reciprocating saw blades, as well as M1 lubricant and precision ground flat stock products.It also provides measuring tools, such as micrometers, vernier calipers, height gages, depth gages, electronic gages, dial indicators, steel rules, and combination squares, as well as custom and non-contact gaging.

In addition, the company offers hand tools for measuring, marking, and layout that include tapes, levels, chalk lines, and other products for building trades, and construction and retail trades.Further, it provides carbide tipped products for cutting ferrous materials, and non-ferrous metals and castings.The company primarily distributes its precision hand tools, and saw and construction products through distributors or resellers.

It serves the metalworking, aerospace, medical, oil and gas, machinery, government, equipment, and automotive markets; marine and farm equipment shops, and do-it-yourselfers; and tradesmen, which comprise builders, carpenters, plumbers, and electricians.The L.S. Starrett Company was founded in 1880 and is headquartered in Athol, Massachusetts.

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1.b. Last Insights on SCX

The L.S. Starrett Company's 63.0% performance can be attributed to its recent merger agreement with MiddleGround Capital, which offers a 63% premium to the closing stock price. The transaction, valued at $16.19 per share, is expected to make the company private. The deal's significant premium and the company's decision to go private likely contributed to the stock's impressive performance, as investors reacted positively to the news.

1.c. Company Highlights

Last Price	16.18
Change Percentage	0.06%
Open	16.17
Previous Close	16.17
Market Cap ( Millions)	113
Volume	61690
Year High	16.19
Year Low	8.55
M A 50	16.0
M A 200	12.38

FCF Yield	15.06%
Dividend Yield	0.00%
ROE	19.91%
Debt / Equity	11.85%
Net Debt / EBIDTA	13.86%
Price To Book	0.92
Price Earnings Ratio	5.18
Price To FCF	6.64
Price To sales	0.44
EV / EBITDA	3.35

2. Transcript Summary

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3. NewsRoom

L.S. STARRETT INVESTOR ALERT by the Former Attorney General of Louisiana: Kahn Swick & Foti, LLC Investigates Adequacy of Price and Process in Proposed Sale of The L.S. Starrett Company (NYSE: SCX)

Mar -12

Source: businesswire.com

Shareholder Alert: Ademi LLP investigates whether L.S. Starrett Company has obtained a Fair Price in its transaction with MiddleGround

Mar -11

Source: prnewswire.com

SCX Stock Alert: Halper Sadeh LLC Is Investigating Whether the Sale of The L.S. Starrett Company Is Fair to Shareholders

Mar -11

Source: businesswire.com

The L.S. Starrett Company Enters Into a Merger Agreement With MiddleGround Capital to Become Private Company

Mar -11

Source: businesswire.com

The L.S. Starrett Company Announces Fiscal 2024 Second Quarter Results

Feb -16

Source: businesswire.com

SHAREHOLDER ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of The L.S. Starrett Company - SCX

Oct -09

Source: prnewswire.com

SHAREHOLDER ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of The L.S. Starrett Company - SCX

Sep -29

Source: prnewswire.com

SHAREHOLDER ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of The L.S. Starrett Company - SCX

Sep -21

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.58%)

6. Segments

International Industrial

Expected Growth: 4.5%

Growing demand for precision engineering and quality control in industrial applications, increasing adoption of Industry 4.0 technologies, and rising need for accurate measurement and inspection tools drive the growth of the precision straight edge market.

North America Industrial

Expected Growth: 4.5%

The North America Industrial segment is expected to grow driven by increasing demand for precision measurement and inspection tools in aerospace, automotive, and manufacturing industries, coupled with advancements in technology and rising quality control standards.

Global Test and Measurement

Expected Growth: 4.8%

Growing demand for precision measurement and testing solutions in industrial and consumer applications, driven by increasing adoption of Industry 4.0 technologies, rising quality control requirements, and expanding use of IoT devices.

7. Detailed Products

Precision Measuring Tools

High-precision measuring tools for accurate measurements in various industries such as aerospace, automotive, and manufacturing.

Saw Blades and Bandsaw Blades

High-quality saw blades and bandsaw blades designed for optimal performance and durability in various cutting applications.

Material Testing Equipment

Equipment for testing the physical and mechanical properties of materials, including hardness, tensile strength, and impact resistance.

Optical Comparators

High-precision optical comparators for measuring and inspecting small parts and features.

Force and Torque Measurement

Equipment for measuring force and torque in various applications, including material testing and quality control.

Custom Engineered Solutions

Custom-designed and engineered solutions for specific measurement and testing applications.

8. The L.S. Starrett Company's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for The L.S. Starrett Company is medium due to the availability of alternative precision measurement tools and instruments from other manufacturers.

Bargaining Power Of Customers

The bargaining power of customers for The L.S. Starrett Company is low due to the company's strong brand reputation and the lack of price sensitivity among its customers.

Bargaining Power Of Suppliers

The bargaining power of suppliers for The L.S. Starrett Company is medium due to the availability of alternative suppliers and the company's dependence on a few key suppliers.

Threat Of New Entrants

The threat of new entrants for The L.S. Starrett Company is low due to the high barriers to entry in the precision measurement tools and instruments industry.

Intensity Of Rivalry

The intensity of rivalry for The L.S. Starrett Company is high due to the presence of several established competitors in the precision measurement tools and instruments industry.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	10.60%
Debt Cost	6.35%
Equity Weight	89.40%
Equity Cost	6.35%
WACC	6.35%
Leverage	11.85%

11. Quality Control: The L.S. Starrett Company passed 5 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Insteel Industries

A-Score: 6.5/10

Value: 5.3

Growth: 4.3

Quality: 6.2

Yield: 9.0

Momentum: 8.5

Volatility: 5.3

1-Year Total Return ->

Kennametal

A-Score: 5.0/10

Value: 6.3

Growth: 4.2

Quality: 4.9

Yield: 6.0

Momentum: 2.5

Volatility: 6.0

1-Year Total Return ->

Eastern

A-Score: 4.9/10

Value: 8.4

Growth: 5.4

Quality: 4.8

Yield: 4.0

Momentum: 1.5

Volatility: 5.0

1-Year Total Return ->

Starrett

A-Score: 4.7/10

Value: 8.4

Growth: 6.9

Quality: 6.8

Yield: 0.0

Momentum: 5.0

Volatility: 1.3

1-Year Total Return ->

Apogee Enterprises

A-Score: 4.7/10

Value: 6.3

Growth: 6.1

Quality: 4.7

Yield: 5.0

Momentum: 0.5

Volatility: 5.7

1-Year Total Return ->

Hillman Solutions

A-Score: 3.5/10

Value: 3.4

Growth: 5.4

Quality: 3.9

Yield: 0.0

Momentum: 3.5

Volatility: 5.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-6.11%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.35%

The L.S. Starrett Company - US8556681091

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on SCX

1.c. Company Highlights

Strong Momentum

More Volatile

Cheaper

Fairly Valued

Average Yield

Medium Volatility

Stable Momentum

Average Growth

Average Quality

Better Quality

2. Transcript Summary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.58%)

6. Segments

International Industrial

Expected Growth: 4.5%

North America Industrial

Expected Growth: 4.5%

Global Test and Measurement

Expected Growth: 4.8%

7. Detailed Products

Precision Measuring Tools

Saw Blades and Bandsaw Blades

Material Testing Equipment

Optical Comparators

Force and Torque Measurement

Custom Engineered Solutions

8. The L.S. Starrett Company's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: The L.S. Starrett Company passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

16.18$

Current Price

16.18$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA