Airgas (ARG) is the nations leading supplier of gasses used for welding (including welding machines and rentals), medical use, dry ice, refrigerants, breathing air, ammonia products and other chemicals. Food makers also use Airgas to store frozen items.
Founded in 1982, Airgas went public in 1986 and has since made 450 acquisitions in this fragmented industry that is dominated by small businesses. It has 11,000 customers and a 25% market share with more than a million customers. The stock pays a dividend, management buys back stock, and of course acquisitions are a big part of Airgas’ growth.
Ten Year Chart
The ten-year chart of ARG looks good, but profit growth has slowed the last few years. Last qtr the company bought back 1 million shares, acquired 9 businesses, and rofits were down 2% as sales rose 3%. Sales and profits were hurt by both a strong dollar (large customers export) and a drop in oil. Airgas has customers that make pipelines and tanks, and need gas to weld these together.
Airgas pays a 2% dividend and analysts estimate its long-term growth rate at 9% a year, for a possible 11% total annual return. During the last decade ARG has grown at 14% per year in additions to paying out $10 in dividends. Investors made a 300% return on their money in ten years.
Profit History
This stock was more reasonable 4-8 years ago when the P/E was 14-18. Now ARG’s P/E is 21 which is a tad high as the company is expected to grow profits just 2% this year.
Management has been increasing the dividend at a solid rate throughout the past decade, the yield has grown from 0.8% to 2% during that time.
Sharek’s Take
Airgas is a conservative stock that delivers growth via acquisitions, stock buybacks and dividends. Value Line gives it a top rating for safety, which is important with the current stock market in turmoil due to China growth concerns. Overall I feel ARG can provide total returns of 11% per year, but the current outlook isn’t so rosy as the higher dollar and lower oil prices are holding back both sales and profits.
View the One Year Chart here. View the Earnings Table here.
