XPEL: The King of Paint Protection

09/18/2020 5:00 am EST

Focus: INDUSTRIALS

Tony Sagami

Editor, Weiss Ratings LLC's Weiss Ultimate Portfolio

XPEL (XPEL) isn't a household name and has only been public since July 2019, but it is one of the fastest growing companies around, observes Tony Sagami, editor of Weiss Ultimate Portfolio.

The firm manufactures and sells paint protection film (PPF) to auto dealers. Initially for high-dollar luxury cars, the paint is now used on all types of new vehicles.

Auto dealers apply a small amount of PPF to an auto’s most vulnerable edges and then upsells customers on protecting the entire automobile, resulting in higher profits per car. XPEL paint coatings are fantastically effective and can extend an auto’s paint finish for years.

And as an investment, XPEL’s shine is even brighter. XPEL reported its Q2 results in early August and they were simply excellent. Revenues of $35.8 million, a 19% year-over-year increase and a whopping $9 million more than Wall Street was expecting. Profits of 14 cents per share, a 32% year-over-year increase.

The results are even more impressive considering that the timeframe during Q2 was April through June, the peak of the coronavirus shutdown. And XPEL isn’t a one quarter wonder. Revenues have been growing like clockwork and over the last 12 months, annual profits went from 12 cents to 31 cents, a 163% increase.

After the U.S., which accounts for 45% of revenue, China is the second largest market for XPEL. And boy is its China business booming.In the second quarter, China revenue soared from $3.1 million to almost $10 million, a 225% increase. Better yet, XPEL expects its China business to keep booming.

XPEL has signed an advertising/marketing deal with Penske Automotive Group (PAG), an international auto dealer chain with more than 400 dealers in the U.S., United Kingdom and China.

I also love it when insiders put their money where their mouths are; XPEL insiders own more than 40% of the company stock. That’s committed!

Here’s an example of how that high insider ownership translates into excellent management. Even though revenues were up 19%, XPEL managed to lower its overall operating expenses from $6.7 million last year to $6.6 million this year.

High insider ownership isn’t a guarantee of profits, but it damn well means that management is both highly motivated and highly confident in the company’s future.

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