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TFSA Value Picks: This Neglected Auto Stock Could Deliver High Growth

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Exco Technologies (TSX:XTC) is a designer, developer, and manufacturer of dies, moulds, components and assemblies, and consumable equipment for the die-cast, extrusion, and automotive industries. The company’s head office staff consists of seven people who have responsibility for the collection of financial data, budgetary controls, banking, treasury, insurance, corporate philosophy, and policy.

Each of Exco’s main divisions are operated as autonomous profit centres and are part of either the casting and extrusion technology or the automotive solutions reporting segments. The profit centre basis enables the company to reward managers and senior employees for results generated directly by individual performance. The maintenance of focused divisions enables the company to respond quickly to customer requirements and shifts in the market, and it encourages innovation.

Highly skilled work force

As well, the independence of each plant allows Exco to react quickly to new business opportunities. This organizational structure allows decision-making and cost control to occur at the operational level. The personal and financial rewards offered to employees have resulted in a very stable and highly skilled work force, which includes a significant number who are engineers, toolmakers, and machinists. In addition, separate operating divisions have led to better employee relations, as management is able to work individually with employees on a daily basis.

Employee relations are good with the Mexico and Brazil employees subject to a collective bargaining agreements. At several Exco locations where design and engineering capabilities are integral parts of the business model, Exco encourages further education of employees and is an active participant in apprenticeship programs. In addition, the company co-operates with and supports several local community colleges from which it typically draws Exco’s design engineers.

Leveraging support

The casting and extrusion segment designs, engineers, and manufactures tooling, which is sold separately to Exco’s customers. The automotive solutions segment primarily purchases tools from third parties for production programs that are sold to Exco’s customers on a pass-through basis. The company employs engineers with a wide range of skills in design and engineering of new products, processes, and manufacturing. Each business group is responsible for specific engineering requirements but also leverage support from the other groups for collaborative projects, if required.

The company has mechanical and design engineering capabilities, with the ability to design both tools and parts. The company communicates electronically with customers’ engineering departments to provide Exco’s customers with industry leading engineering support. While many of the automotive solutions segment’s products are convenience products for the interior passenger compartments and trunks of vehicles, the products are highly engineered to meet strict safety regulations.

Developing new processes

The company’s ability to develop new technology, products and manufacturing processes are key factors in continuing to generate new business opportunities and remaining competitive. Exco’s research and development activities are closely tied to both customer requirements through improved design developments and manufacturing processes.

Further, the company has developed considerable expertise including technical and design experience, and skilled engineering groups. Exco also holds certain intellectual property rights such as patents and trademarks. All these factors make Exco a valuable addition to any retail investor’s portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nikhil Kumar has no position in any of the stocks mentioned. The Motley Fool owns shares of EXCO TECH.

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