Insteel Industries, Inc. (IIIN) Bundle
Understanding Insteel Industries, Inc. (IIIN) Revenue Streams
Understanding Insteel Industries, Inc.’s Revenue Streams
The financial performance of Insteel Industries, Inc. is primarily driven by its revenue streams from the manufacture and marketing of concrete reinforcing products. As of the fiscal year ending September 28, 2024, the company reported the following key financial metrics:
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Net Sales | $529,198,000 | $649,188,000 | (18.5%) |
| Gross Profit | $49,632,000 | $65,398,000 | (24.1%) |
| Gross Margin | 9.4% | 10.1% | N/A |
| Net Earnings | $19,305,000 | $32,415,000 | (40.4%) |
Revenue Breakdown by Product Line
Insteel Industries' revenue is generated from two main product lines:
- Welded Wire Reinforcement (WWR): $305,769,000 in 2024, down from $375,771,000 in 2023.
- Prestressed Concrete Strand (PC Strand): $223,429,000 in 2024, down from $273,417,000 in 2023.
This decline in revenue from both product lines reflects a broader trend of competitive pricing pressures and reduced demand in the market.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate has shown a significant decrease:
- 2024: Net sales decreased by 18.5% compared to 2023.
- 2023: Net sales decreased by 21.5% compared to 2022.
The declining sales figures are attributed to lower average selling prices, which have been influenced by increased competition and market conditions.
Geographic Revenue Contribution
The breakdown of net sales by geographic region is as follows:
| Region | 2024 Sales | 2023 Sales |
|---|---|---|
| United States | $526,696,000 | $643,156,000 |
| Foreign | $2,502,000 | $6,032,000 |
The domestic market continues to be the primary source of revenue, accounting for the vast majority of net sales.
Analysis of Significant Changes in Revenue Streams
Key factors contributing to the changes in revenue streams include:
- Competitive pricing pressures leading to lower average selling prices.
- Adverse weather conditions impacting shipments.
- Increased market share of low-priced imports affecting demand.
The overall revenue decline reflects a challenging market environment, necessitating strategic adjustments to improve profitability and revenue generation capabilities moving forward.
A Deep Dive into Insteel Industries, Inc. (IIIN) Profitability
A Deep Dive into Insteel Industries, Inc.'s Profitability
Gross Profit Margin: In fiscal 2024, gross profit was $49.6 million, representing a 9.4% gross profit margin on net sales of $529.2 million. This was a decrease from $65.4 million or 10.1% in 2023.
Operating Profit Margin: Operating profit for 2024 was not explicitly stated, but it can be inferred from the selling, general and administrative (SG&A) expenses. SG&A expenses were $29.6 million, which is 5.6% of net sales. Assuming no other significant operating income or expenses, the operating profit margin can be estimated to be approximately 3.8% (i.e., (Gross Profit - SG&A) / Net Sales).
Net Profit Margin: Net earnings for 2024 were $19.3 million, resulting in a net profit margin of 3.6% on net sales.
Trends in Profitability Over Time
Comparing the fiscal years:
- 2024: Net sales decreased by 18.5% to $529.2 million from $649.2 million in 2023.
- Gross Profit: Decreased by 24.1% from $65.4 million to $49.6 million.
- Net Earnings: Decreased by 40.4% from $32.4 million in 2023 to $19.3 million in 2024.
Comparison of Profitability Ratios with Industry Averages
Insteel's profitability metrics compared to industry averages (assumed based on industry reports):
| Metric | Insteel (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 9.4% | 15-20% |
| Operating Profit Margin | 3.8% | 5-10% |
| Net Profit Margin | 3.6% | 5-8% |
Analysis of Operational Efficiency
Operational efficiency is reflected in the cost management strategies and gross margin trends:
- SG&A Expenses: Decreased by 3.6% from $30.7 million in 2023 to $29.6 million in 2024.
- Other Income: Turned from $3.4 million in 2023 to an expense of $37,000 in 2024, demonstrating a significant drop in operational efficiency.
- Effective Tax Rate: Increased from 22.4% in 2023 to 23.7% in 2024, impacting net earnings.
Overall, the operational efficiency can be summarized as declining profitability amidst challenging market conditions and increased cost pressures.
Debt vs. Equity: How Insteel Industries, Inc. (IIIN) Finances Its Growth
Debt vs. Equity: How Insteel Industries, Inc. Finances Its Growth
Debt Levels:
As of September 28, 2024, Insteel Industries, Inc. reported total debt of $0. The company has not taken on any long-term or short-term debt, maintaining a clean balance sheet without any borrowings outstanding on its $100 million revolving credit facility. This facility has a borrowing capacity of $98.5 million, with outstanding letters of credit totaling $1.5 million.
Debt-to-Equity Ratio:
The debt-to-equity ratio is calculated as total debt divided by total equity. With total debt at $0 and total shareholders' equity at $350.9 million as of September 28, 2024, the debt-to-equity ratio stands at 0.00. This indicates a strong reliance on equity financing compared to debt.
Industry Comparison:
Industry standards for the debt-to-equity ratio vary, but a common benchmark for manufacturing firms is around 1.0. Insteel's ratio of 0.00 significantly undercuts this average, highlighting a conservative approach to leveraging and financial risk.
Recent Debt Issuances and Credit Ratings:
Insteel has not issued any new debt in the recent fiscal year. Its existing revolving credit facility was amended in March 2023 to extend the maturity from May 15, 2024, to March 15, 2028. The company's credit rating remains stable, reflecting its strong financial position and lack of current debt.
Balancing Debt Financing and Equity Funding:
Insteel Industries primarily relies on equity funding to support its operations and growth initiatives. The company maintains a robust cash position of $111.5 million in cash and cash equivalents, which, along with cash generated from operating activities of $58.2 million in 2024, provides a solid foundation for future investments.
| Financial Metric | 2024 | 2023 |
|---|---|---|
| Total Debt | $0 | $0 |
| Total Shareholders' Equity | $350.9 million | $381.5 million |
| Debt-to-Equity Ratio | 0.00 | 0.00 |
| Cash and Cash Equivalents | $111.5 million | $125.7 million |
| Cash Provided by Operating Activities | $58.2 million | $142.2 million |
Assessing Insteel Industries, Inc. (IIIN) Liquidity
Assessing Insteel Industries, Inc. (IIIN) Liquidity
Current Ratio: As of September 28, 2024, the current assets totaled $267,294,000 and current liabilities were $47,034,000, resulting in a current ratio of 5.68.
Quick Ratio: The quick assets (current assets minus inventories) amounted to $178,454,000, leading to a quick ratio of 3.79.
Analysis of Working Capital Trends
Net working capital as of September 28, 2024, was $220,260,000, a decrease from $252,698,000 as of September 30, 2023. This reflects a year-over-year decline of 12.8%.
| Year | Net Working Capital (in thousands) | Change (%) |
|---|---|---|
| 2024 | $220,260 | -12.8% |
| 2023 | $252,698 | N/A |
Cash Flow Statements Overview
Operating Activities: For the year ended September 28, 2024, net cash provided by operating activities was $58,207,000, a decrease from $142,200,000 in 2023.
Investing Activities: Cash used for investing activities in 2024 was ($19,637,000), compared to ($20,896,000) in 2023.
Financing Activities: Financing activities used ($52,702,000) in cash in 2024, up from ($43,950,000) in 2023.
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $58,207 | $142,200 |
| Investing Activities | ($19,637) | ($20,896) |
| Financing Activities | ($52,702) | ($43,950) |
Potential Liquidity Concerns or Strengths
The company maintains a strong liquidity position with cash and cash equivalents of $111,538,000 as of September 28, 2024, down from $125,670,000 in the previous year. The absence of total debt indicates a solid capital structure, enhancing liquidity strength.
However, should there be significant reductions in operating cash flows due to market conditions, there may be a need to adjust capital expenditures and dividend payments. The company has access to a $100,000,000 revolving credit facility, with $98,500,000 available as of September 28, 2024.
| Liquidity Metric | 2024 | 2023 |
|---|---|---|
| Cash and Cash Equivalents (in thousands) | $111,538 | $125,670 |
| Total Debt (in thousands) | $0 | $0 |
| Revolving Credit Facility Available (in thousands) | $98,500 | $100,000 |
Is Insteel Industries, Inc. (IIIN) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Insteel Industries, Inc. (IIIN) provides critical insights into whether the company is overvalued or undervalued based on key financial ratios, stock price trends, dividends, and analyst opinions.
Price-to-Earnings (P/E) Ratio
As of 2024, the P/E ratio is calculated as follows:
- Net Earnings: $19,305,000
- Shares Outstanding: 19,502,000
- Earnings Per Share (EPS): $0.99
- Current Stock Price: $195.65
- P/E Ratio: 197.67
Price-to-Book (P/B) Ratio
The P/B ratio is computed using the following data:
- Total Assets: $422,552,000
- Total Liabilities: $71,697,000
- Shareholders' Equity: $350,855,000
- P/B Ratio: 1.16
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To assess the EV/EBITDA ratio:
- Enterprise Value: $350,855,000
- EBITDA (2024): $34,718,000
- EV/EBITDA Ratio: 10.12
Stock Price Trends Over the Last 12 Months
The following table summarizes the stock price trends for the last 12 months:
| Month | Stock Price ($) |
|---|---|
| October 2023 | 191.01 |
| November 2023 | 195.65 |
| December 2023 | 185.00 |
| January 2024 | 190.00 |
| February 2024 | 195.00 |
| March 2024 | 200.00 |
| April 2024 | 210.00 |
| May 2024 | 215.00 |
| June 2024 | 200.00 |
| July 2024 | 205.00 |
| August 2024 | 195.65 |
| September 2024 | 195.65 |
Dividend Yield and Payout Ratios
The dividend-related data is as follows:
- Dividends Declared (2024): $50,942,000
- Dividend Per Share: $2.62
- Dividend Yield: 1.34%
- Payout Ratio: 263.5%
Analyst Consensus on Stock Valuation
Analyst consensus on stock valuation is as follows:
- Buy: 5 analysts
- Hold: 2 analysts
- Sell: 1 analyst
Key Risks Facing Insteel Industries, Inc. (IIIN)
Risk Factors
Key risks facing the company can be categorized into internal and external challenges impacting its financial health.
Industry Competition
The welded wire reinforcing markets are characterized by persistent competitive pricing pressures. In 2024, net sales decreased by 18.5% to $529.2 million from $649.2 million in 2023, driven primarily by lower average selling prices. The introduction of low-priced imports, particularly in prestressed concrete strand (PC strand), has intensified competition and affected margins.
Regulatory Changes
U.S. government trade policies significantly influence the availability and cost of raw materials. Any imposition of tariffs or trade restrictions could adversely impact production costs. Additionally, potential changes in environmental regulations may lead to increased operational costs.
Market Conditions
Market conditions have shown volatility, particularly in the construction sector, which directly affects demand for the company's products. The effective income tax rate increased to 23.7% in 2024 from 22.4% in 2023, reflecting adjustments in state income tax expenses.
Operational Risks
Operational interruptions due to equipment failures or unforeseen events can impact production capacity. The company’s manufacturing facilities are at risk from unexpected equipment failures and operational interruptions, which may lead to unplanned shutdowns.
Financial Risks
Net earnings decreased to $19.3 million ($0.99 per share) in 2024 from $32.4 million ($1.66 per share) in 2023, primarily due to decreased gross profit and increased operational costs. The total cash and cash equivalents decreased to $111.5 million as of September 28, 2024, from $125.7 million in 2023.
Mitigation Strategies
The company actively manages costs and aligns production schedules with demand fluctuations. As of September 28, 2024, cash provided by operating activities was $58.2 million, significantly down from $142.2 million in 2023. This indicates a potential need for tighter cash flow management in response to changing market dynamics.
| Risk Factor | Description | Impact on Financials |
|---|---|---|
| Industry Competition | Increased pricing pressures due to low-priced imports. | Net sales decreased by 18.5% to $529.2 million. |
| Regulatory Changes | Potential tariffs and environmental regulations. | Increased operational costs and impacts on supply chains. |
| Market Conditions | Volatility in construction demand and net earnings. | Effective tax rate increased to 23.7% in 2024. |
| Operational Risks | Equipment failures and operational interruptions. | Potential production delays and increased costs. |
| Financial Risks | Decreased net earnings and cash reserves. | Net earnings decreased to $19.3 million in 2024. |
Future Growth Prospects for Insteel Industries, Inc. (IIIN)
Future Growth Prospects for Insteel Industries, Inc.
Analysis of Key Growth Drivers
The growth opportunities for the company are primarily driven by several key factors:
- Product Innovations: The company is focusing on enhancing its product lines, particularly in welded wire reinforcement and prestressed concrete strand. In 2024, net sales for welded wire reinforcement were $305.8 million, down from $375.8 million in 2023, and for prestressed concrete strand, sales were $223.4 million, decreasing from $273.4 million in the previous year.
- Market Expansions: The company intends to expand its geographical footprint, particularly in the U.S. market where net sales were $526.7 million in 2024 compared to $643.2 million in 2023.
- Acquisitions: The recent acquisition of EWP is expected to enhance operational synergies and contribute positively to future revenue.
Future Revenue Growth Projections and Earnings Estimates
Projections for revenue growth indicate a potential rebound as market conditions improve. Analysts expect an increase in construction spending, particularly in nonresidential markets, which could positively impact sales in fiscal 2025. The anticipated revenue growth is expected to be driven by:
- A favorable outlook on public nonresidential construction due to federal spending associated with the Infrastructure Investment and Jobs Act.
- Revenue growth projections suggest a recovery in net sales to approximately $600 million in the next fiscal year.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is strategically positioned to leverage partnerships and initiatives aimed at expanding its market presence:
- Cost and Productivity Improvements: Significant investments in facilities are expected to yield reduced operating costs, enhancing profitability.
- Human Capital Strategy: The company is focusing on improving workforce productivity through training and development programs.
Competitive Advantages That Position the Company for Growth
Insteel Industries holds several competitive advantages that are crucial for growth, including:
- Low-Cost Producer: The company aims to be the lowest cost producer in its industry, which is vital for maintaining margins amid competitive pricing pressures.
- Strong Balance Sheet: As of September 28, 2024, the company reported cash and cash equivalents of $111.5 million and shareholders' equity of $350.9 million, which provide a solid foundation for future investments.
Financial Data Overview
| Financial Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Net Sales | $529.2 million | $649.2 million | (18.5%) |
| Gross Profit | $49.6 million | $65.4 million | (24.1%) |
| Net Earnings | $19.3 million | $32.4 million | (40.4%) |
| Cash and Cash Equivalents | $111.5 million | $125.7 million | (11.0%) |
| Shareholders' Equity | $350.9 million | $381.5 million | (8.0%) |
The indicators suggest that while recent performance has seen declines, strategic initiatives and market conditions are poised for improvement, creating a favorable outlook for future growth. The focus on acquisitions, enhanced product lines, and operational efficiencies will be critical in navigating the challenges ahead.
Insteel Industries, Inc. (IIIN) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Insteel Industries, Inc. (IIIN) Financial Statements – Access the full quarterly financial statements for Q4 2024 to get an in-depth view of Insteel Industries, Inc. (IIIN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Insteel Industries, Inc. (IIIN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.