L.B. Foster (FSTR), mcap=$142m price $13.00 vs $9.64

$FSTR pitch:
– Small-cap industrial manufacturer and service provider to the rail and general infrastructure industries.
– Over the last two years, FSTR was transformed from strategy, leverage, and management perspectives.
– Currently is too cheap relative to the expected growth in free cash flow over the next few years.
– Recent acquisitions and timely divestitures indicate a greater portion of future revenue growth and increased profitability will come from higher gross margin segments of rail technologies and precast concrete.
– Tailwinds from the recent US infrastructure packages, stable, large-scale commercial and infrastructure construction projects.
– Set to elevate back to Russell 2000 at some point in 2023-2024 – was kicked out in June’21.

$FSTR valuation:
– On an LTM basis trades at 7.5x EBITDA and 6x fwd EBITDA.
– From $10/share today, FSTR is likely a $20-25 stock by the end of 2023 with a clear path to $40/share by 2025.

Exp. gain: +100%-150% to $20-25/share by the end of 2023.

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