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American Pacific Corporation (APFC) in the Realm of Future Business

A net profit margin of below 4% over the last four quarters is not impressive even in today’s depressed stock investment environment. However, the nature of business, and its future scope make this stock worthy of serious consideration.

The main business is to provide specialized energy sources to send objects in to outer space. It also makes substances to control satellite movements. This makes the Defense Department and related bodies of the US government as an overwhelmingly large customer group. Perhaps this reflects on company profitability, but this kind of stock should be evaluated for its strategic and future values. The company also makes chemicals used in portable fire-fighting systems.

The Fine Chemicals business of the company operates in the health care space. It has regulatory approvals to make active ingredients and intermediates used in a range of important medical conditions.

The company has a proprietary and branded system to purify water. This includes removal of pathogens and well as deodorization. This business line has significant future value considering global water shortages.

The Price to Equity ratio has stayed below 17 over the last four quarters, which is less than half the figure for the Basic Materials sector. The Price to Cash Flow has been less than one sixth the figures for the sector during this period. Annual sales growth during the most recent quarter has been faster than for the Chemical Manufacturing industry. This also applies to the five year sales growth rate. The long term prospects are therefore of interest.

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