GenCorp – Our Favorite Idea

By Nick Toor:

GenCorp (GY)

GenCorp Inc. ("GenCorp", or the "Company") is a unique company with multi-year contracted revenue streams, monopoly sole-source position in most of its product lines with an almost insurmountable competitive moat, un-replicable proprietary technology, an open sky growth trajectory and multiple catalysts for value realization. If one ever finds such a company, it is usually trading at a sky high multiple but this one can be had for less than 9.5X pro forma 2013E free cash flow. It is not an unknown name for value investors, but most of the past analysis focused primarily on the hidden value of its real estate assets, which after giving a discounted multiple to its core business made the stock cheap. That thesis has played out beautifully as the stock has gone up 4 fold and 7 fold over the last 18 months and four years, respectively. Our analysis will focus on the

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