Atlas Engineered Products: Slow and Steady Growth

Atlas Engineered Products (TSXV: AEP, OTC: APEUF), a prominent manufacturer of engineered wood products in Canada, has been experiencing steady and gradual growth in its stock price. Over the past six months, AEP's stock has risen from $0.55 to $1.12 as of February 8, 2023. Remarkably, Atlas Engineered Products boasts positive earnings, a rarity on the TSXV exchange.

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Sector Overview

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Engineered wood products are created by binding wood fibers, strands, and chips together using adhesives to form composite wood structures. One of the key drivers of market growth is the increasing demand for engineered wood as a substitute for materials with high emissions, such as concrete, steel, and aluminum, to reduce greenhouse gas emissions. Additionally, there has been a surge in housing innovation and renovation, particularly in affluent nations. Governments in various countries are making significant investments in housing projects, contributing to the market's expansion. Moreover, cross-laminated timber (CLT) is gaining popularity as a building material worldwide.

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Company Overview

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Atlas Engineered Products (TSXV: AEP, OTC: APEUF) specializes in the design, manufacturing, and sale of engineered roof trusses, floor trusses, wall panels, and windows across Canada. The company offers a range of engineered wood products and patio doors for the construction of single-family homes, townhouses, multi-story wood-framed residential buildings, commercial buildings, and agricultural structures. Atlas Engineered Products operates as a family of seven companies spread throughout Canada, providing design, engineering, and permitting services, as well as roof systems, floor systems, and wall panels.

Design, Engineering & Permitting Services: Atlas Engineered Products boasts an expert design team that utilizes cutting-edge design and engineering technologies to deliver consistent, accurate, and high-quality products. The company also assists with obtaining building permits. AEP's designers create orders in a controlled indoor factory setting using advanced BIM (Building Information Modeling) software, laser precision cutting equipment, and automated assembly equipment.

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Roof Systems & Roof Trusses Products: Atlas Engineered Products offers innovative and cost-effective design and engineering solutions for accelerated installation, increased span possibilities, and reduced installation times. Their roof trusses are a cost-effective and efficient component for any building project, whether it be a complex commercial design or a simple residential structure.

Floor Systems & Floor Trusses Products: AEP's custom-built floor panels serve as a convenient alternative to on-site framing, ensuring quality control and seamless integration with customers' wall and roof components. The high-quality floor trusses and systems manufactured by Atlas Engineered Products enable labor cost reduction on-site or the ability to work on subsequent projects simultaneously.

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Wall Panels: AEP's wall panels offer a more cost-effective solution compared to on-site framing, providing better quality control, labor cost savings, and seamless integration with floor and roof components. The specialized design software and production capabilities of Atlas Engineered Products result in square walls with correct nailing patterns and studs and headers designed to withstand applied loads.

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Share Structure and Financials

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Atlas Engineered Products has demonstrated positive financial performance. For the quarter ending September 30, 2022, the company generated $17.6 million in revenue and had a gross profit of $6.1 million. Atlas Engineered Products continues to maintain positive revenue, with a net income of $3.1 million. In terms of earnings per share, this amounts to $0.05 on a basic and diluted basis. For the last quarter of 2022, the company expects revenues of approximately $14.9 million, a 7% increase compared to the previous quarter's revenues of $13.9 million. Furthermore, Atlas Engineered Products anticipates reporting revenues of approximately $61.8 million for 2022, compared to just under $55 million in 2021.

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On March 9, 2023, the company announced a significant purchase order worth $1.6 million for wall panels and engineered wood products, with $850,000 of the order dedicated to wall panel sales. This represents a significant expansion into the wall panel industry for Atlas Engineered Products. In 2022, wall panel sales amounted to only $108,000, highlighting the company's commitment to developing this segment of its business.

"We are delighted to receive this major purchase order as it marks our expansion into the wall panel industry. This represents the next step in our strategic growth as we aim to become a quality multi-product supplier, offering floor trusses, beams, roof trusses, and now, wall panels, while maintaining a high level of customer service."

Hadi Abassi, CEO & President, Founder

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In terms of share structure, Atlas Engineered Products has 57.2 million shares issued and outstanding as of November 29, 2022. The company has 3 million options outstanding as of September 30, with an average price of $0.48 per option. Currently, there are no warrants issued by the company. In terms of the balance sheet, Atlas Engineered Products holds $12.9 million in cash, has $51.8 million in total assets, and $24.5 million in total liabilities.

The stock price of Atlas Engineered Products has shown a solid uptrend, currently trading at $0.94 as of April 5, 2023. Over the past 52 weeks, AEP has traded between $0.42 and $1.12.

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Conclusion

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Atlas Engineered Products (TSXV: AEP, OTC: APEUF) possesses several favorable qualities. The company exhibits a low share structure and engages in share buybacks, while also reporting positive earnings per share. Additionally, Atlas Engineered Products has secured a significant contract for wall panels, a segment that has significant growth potential. It will be interesting to observe whether investors believe the market cap should be valued higher to reflect these positive developments.

In summary, Atlas Engineered Products showcases steady and gradual growth in its stock price, underpinned by positive fundamentals and a solid contract portfolio. As the company continues to expand and optimize its operations, it has the potential to attract further investor interest and deliver long-term value.

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