National Presto Industries (NPK): Strong balance sheet plus dividend

By J. Royden Ward, Editor and Analyst of Cabot Benjamin Graham Value Letter

From Cabot Wealth Advisory, 6/16/08 Sign up for free Cabot Wealth Advisory e-newsletter

National Presto Industries (NPK) is a small company with sales of $400 million and a market capitalization of $450 million. National Presto, founded in 1905 in Eau Claire, Wisconsin, manufactures a wide range of household cooking appliances including pressure cookers, deep fryers and roasting pots. 

In addition, National Presto produces fondue pots, woks and hamburger cookers-all with NPK’s removable heat control devices. The company also sells ammunition and cartridge cases to the U.S. military and sells disposable diapers for babies and adults. The ammunition and diaper businesses are ancillary but quite profitable.

National Presto’s sales and earnings increased dramatically in 2007, buoyed by higher sales and profits from its ammunition business. Sales in the first quarter of 2008 slowed because of delayed payments from the military, a temporary setback. But EPS jumped 25% thanks to a highly successful cost reduction program. We forecast 15% EPS growth for 2008 as defense payments normalize and new appliances are introduced. The balance sheet is very strong with no debt and a whopping $21 per share cash balance.

National Presto’s price has increased noticeably during the past few weeks, and I believe the price will rise further as more investors discover this little-known company. The dividend yield of 6.4% is extraordinary. NPK shares will likely climb to my minimum sell target price within one to two years. I strongly recommend buying National Presto Industries at its current price.

Roy Ward
J. Royden Ward

Editor of Cabot Benjamin Graham Value Letter
A lifelong investment professional, J. Royden Ward applies his 40 years of investment research, portfolio management, writing and publishing experience to his role as analyst and editor of Cabot Benjamin Graham Value Letter, which is directed to long-term investors seeking a guide to profitable value investing based on the time-tested systems originally developed by Benjamin Graham, the Father of Value Investing. A second-generation disciple of Benjamin Graham, Roy in 1969 pioneered the development of a computerized model that applied the formulas developed by Graham using a unique ranking system. Today, Roy applies his system to two models in the Value Letter.