Universal Stainless & Alloy Products (USAP), which went public in late 1994 at 8 1/4, was not one of those initial public offerings that doubled its first day. But this is stainless steel, not the Internet. Still, the stock gained some ground and reached 15 in July--then near-disaster struck. A steel-rolling machine malfunctioned at the company's Bridgeville (Penn.) minimill, shutting down operations for five weeks.
That episode might have doomed many other small companies. But under President and CEO Clarence "Mac" McAninch, Universal recouped quickly and went on to report a 56 cents per-share profit for all of 1995 vs. a loss of 62 cents a share in 1994. For the new year, Scott Kalb, managing director at Smith Barney International Asset Management, sees an even brighter picture: earnings of $1.60 a share. If he's right, the stock is a screaming buy, selling for a scant 8 times this year's earnings. For 1997, Kalb forecasts a huge $2.10 to $2.20 a share. So Kalb sees the stock at 12 1/4, reaching as high as 20 over the next year.
Analyst Harris Cohen of Furman Selz, one of the IPO's underwriters, says management continues to build a solid customer base with its niche products. Universal produces only semi-finished stainless steel. He was impressed that during the fourth quarter, Universal signed up new customers accounting for about $11 million in annualized revenues. For a company with 1995 revenues of $48 million, that's a significant gain.