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Why Linamar Shares Leaped

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of auto parts manufacturer Linamar (TSX: LNR) surged 14% today after its quarterly results topped Bay Street expectations.

So what: The stock has soared over the past year on better-than-expected growth, and today’s Q3 results — EPS surged 54% on a revenue increase of 15.5% — only reinforce that positive trend. In fact, operating margins increased about 200 basis points over the year-ago period to 8.2%, suggesting that Linamar’s competitive position and cost structure are improving as well.

Now what: Don’t expect the operating momentum to slow anytime soon. “The completion of our assembled camshaft division acquisition will support our future growth by adding another critical tool to our technology and innovation toolbox,” said CEO Linda Hasenfratz. “The combination of these new business opportunities with the fantastic results for the quarter adds up to a great recipe for continued success.” Of course, with the stock having now doubled from its 52-week lows and sporting a P/E in the mid-teens, a good chunk of that growth might already be baked into the valuation.

Though the market is on to Linamar, it's still overlooking a small-cap stock that the Motley Fool Canada's senior investment advisor thinks has big long-term potential. 

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Fool contributor Brian Pacampara does not own any shares in the companies mentioned.  The Motley Fool does not own any shares in the companies mentioned.

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