Shares of Robbins & Myers (RBN) have basically retraced three years' worth of profits, as concerns around industrial stocks linger throughout the capital markets. However, a closer review of the company’s business, management and growth potential clearly shows that the market is missing out on Robbins & Myers for both the short and long term.

Robbins & Myers is cheap. It trades with a forward P/E of 8 and EV/EBITDA of 3.9. The company is involved in three revenue segments: fluid management; process solutions; and Romaco, or packing and secondary processing.

A quick view from 30,000 feet up: Trading with an 8 forward P/E means that Robbins & Myers is trading at 0.75 times its 2008 revenue growth rate and at 0.5 times its 2009 rate. EBITDA margins are north of 25% companywide. Robbins & Myers has $3 in cash per share and will earn approximately $2.30 per share in 2008 and $2.40 to $2.55 in 2009. Discount those numbers, and this is still compelling.

The fluid management business has a history of innovation in providing cutting-edge systems solutions for the oil and gas exploration, production and pipeline markets. Robbins & Myers is the worldwide leader in the manufacture and marketing of tubing wear prevention solutions. Its solutions allow customers to minimize oil and gas well work-over costs and also help reduce downtime. Concerns around lost sales due to the recent drop in oil and natural gas are ill-founded and lack analytic rigor, as fluid management’s book of business is based on $40 oil.

Orders in the fourth quarter were up 23%, as demand for energy-related products still remained high. Sales grew 8%, and EBIT margins expanded 100 basis points to 29.5%.

The process solutions group is the premier global provider of precision engineered chemical processing in the industry solutions arena. The process solutions division is interesting, as they offer solution serves to the following end-markets: specialty and argi-chemicals, pharmaceuticals, wastewater and water treatment, semiconductors, biotechnology, flue gas desulfurization and biofuels.

Orders were down 4%, as a few large orders will be booked in the fourth quarter. Sales went from $79.6 million in the fourth quarter of 2007 to $87 million the fourth quarter of 2008.

Also, management just announced a 3 million share buyback, saying that “our Board believes that at current prices and historically low valuations, repurchasing our own shares is also an attractive means of enhancing shareholder value.”

Yes, it is true that industrial goods both domestically and international have trended down. But the sky is not falling, as the recent stock action would imply, and one continues to see a robust fundamental story in Robbins & Myers. Additionally, the current price of oil and natural gas are more than sufficient to drive increase demand for Robbins & Myer’s energy-related products, while the decline from their peak should help input costs for their chemical business as well.

For a world leader in industrial pumps, selling at $20 per share, or at slightly less than 6 times earnings, creates a nice opportunity.

Posted on Nov. 5, 2008