Masonite International Corporation (A): Trouble at the Door Harvard Case Solution & Analysis

It was May 19, 2004, and Ralph Thomas, analyst at investment SBU studies the forms 40-F, that one of the companies he covered, Masonite International Corporation (Masonite), filed with the Securities and Exchange Commission (SEC). Masonite was one of the world's largest producers and marketers of doors and door components and systems for the front door, with its headquarters in Toronto, Ontario. His recent results have been very good, with strong growth and high profitability and cash flows. The company is on track to pay down debt and be well positioned to achieve an investment grade credit rating was envy. But despite all this good news, Ralph had some issues, he was wondering whether this strong performance was stable. He knew that the proceeds of building products companies have been cyclical. They tend to be sensitive to the state of the economy, the demand for housing, consumer confidence, a sharp rise in interest rates, changes in terms buyers credit, and rising prices for raw materials such as wood and steel. In most countries around the world recorded the full employment and non-inflationary growth, but the real growth has been so high that the central banks have been mooting the idea of ​​raising interest rates. In addition, there is now a concern that there may be bubbles in several geographic areas. But even more disturbing, the prices of raw materials such as steel, have more than doubled over the past 12 months and were deficient, particularly in North America, the main market Masonite website. If sales to soften in an environment characterized by high production costs and higher interest rates, margins and cash flows Masonite could come under pressure. Ralph has a "buy" rating on the stock. It was time to change it to "hold" or "sell"? "Hide
by Barbara S. Petitt, F. John Mathis Source: Thunderbird School of Global Management 24 pages. Publication Date: July 23, 2011. Prod. #: TB0271-PDF-ENG

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