HIGHLIGHTS

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• Friedman Industries (FRD) is one of those rare occurrences - a company that is selling at near net asset value. For the quarter ending 06/09, the company reported current assets of $43.9 million and total liabilities of $5.6 million.
• Inventory to Sales was 9.29% at the end of FY09. For the trailing 12 months, the Inventory to Sales ratio increased to 10.41%
• The EPS growth rate for the trailing 12 months is 38.2%. The three and five year growth rates are 30.2% and 43.5% respectively.
• FRD has a current ratio of 9.5 and no long term debt. This indicates that the company is financially secure. It is also indicative of a company that may not be putting its assets to the best use. Certainly, the company has room to employ some debt.
• The company has a Price/Sales ratio of 0.2 based on trailing 12 month sales. This is very favorable.

VALUATION METRICS

In determining the fair market value of Friedman Industries, I considered income statement, balance sheet and statement of cash flow data. I give more weight to the statement of cash flows and balance sheet than I do to the income statement and reported or estimated earnings. In my opinion, debt is the greatest determinant of risk and nothing substitutes for cash.

I assign a fair market value of $9.79 to the shares of Friedman Industries, Inc.

DISCLOSURE: The author has no financial interest in Friedman Industries, Inc.