1. ALFRED UNIVERSITY FINANCE PROGRAM
CompX International Inc.
Investment Analyst Report
April 2016
CompX International is a small, Dallas based company that engages in the manufacture and sale
of security products and recreational marine components primarily in North America. They
currently are involved in two segments that provide them with steady and growing revenues.
87.7% of CompX International’s revenue was generated from their manufacture and sale of
security products, while only 12.3% of the company’s revenue was generated by the sale and
manufacture of recreational marine components. CompX International is mainly based in the
security products, while a small amount of the company also focuses on marine components.
This stock is attractive to an investor who is looking for a well-priced stock that has room for
growth opportunities compared to the industry and its competitors.

2. Introduction
CompX International Inc. is a leading manufacturer of engineered components utilized
in a variety of applications and industries, specifically for their security products, headquartered
in Dallas, Texas. CompX International manufactures mechanical and electrical cabinet locks and
other locking mechanisms used in recreational transportation, postal, office, etc. applications.
They also manufacture stainless steel exhaust systems, gauges, throttle controls and trim tabs
for the recreational marine and other industries through our Marine Components segment.
All data hereincomesfromCompXInternational’sSECfilingsandtheirannual presentationunless
otherwise noted.
Reviewof the Company and itsBusiness
Industry Analysis
Industry Classification
Industry Life Cycle Position
The Securityand ProtectionServicesindustryisina mature phase.The Security
and ProtectionServicesindustryisstableandseesagrowingdemandforsecurity
productsin the growingconcernfornot enoughprivacy.The growthof the industryis
expectedtostayconstant,whichwill helpCompXInternational expandtheiroperations
and continue togrowand be a topleaderinsecurityproductsintheirhighlycompetitive
field.
Industry Reaction to Business Cycle
The Securityand ProtectionServicesindustry isanon-cyclical industry,which
meansthat CompXInternational isnotaffectedbycyclical changesinthe market.While
theirmarine service productsare affectedbyseasonal changesandtrendslike the
summertime andnice weather,whichwillexpose thatsegmentof CompXtocyclical
changes.
External Factors
Technology
There are currently no big technological advancements that pose a threat
to the services CompX International provides. However, any drastic increase in
demand could affect the production of the products because of the difficulty of
manufacturing such a large product base.

3. Government
New legislation regarding climate change and the environment could
pose a threat to the marine product servicers segment. It could increase the cost
of production and may affect future sales through the possible price increase,
while trying to appease legislation and follow the laws.
Social
The securities product segment could increase in demand due to the rise
in crime, and overall feeling of insecurity, while the marine services segment
could be negatively impacted due to the issue of global warming, and impact on
the environment.
Demographic
The demographic of the security service products includes anyone who
has a need to protect information and their property. This need ranges from
small businesses, to corporations, governments, or an individual. The
demographic of the marine service products would vary depending on the
location of the consumer.
Foreign
A threat that is posed on CompX is the manufacturing of similar products
in foreign countries across Asia, due to cheaper labor and materials, which
allows foreign competitors to undercut CompX International’s prices.
Company Specific Analysis
General Information
Overview and Business Description
CompX International is a producer of mechanical and electrical cabinet
locks and other locking mechanisms. Their product line is diverse of many
different products involving locking mechanisms. They also have a division
dedicated to marine components. CompX has experienced strong growth in the
last 5 years, returning a CAGR of 6.43% on revenues.
Corporate Strategy
They have been diversifying the products they offer since 2006. The
reason behind the diversification was to help expand their customer base. They

4. also believe that an emphasis on new product development and sales to
additional markets has increased their potential for future sales and has helped
diversify their risk.
Life Cycle
CompX International is nearing maturity. Over the past few years CompX
international has not experienced as much total return as their competitors.
With their diversified product line there still is some growth potential. However,
a foreign country such as China could make and sell their products cheaper than
CompX International. Due to the vast amount of raw materials and the low cost
of labor, China could be able to undersell CompX international. With this being
said I still see the company generating the same steady returns, as it did in years
past.
Productsand Markets
Products and Market Lines
CompX International’s main product line is their mechanical and electrical
cabinet locks and other locking mechanisms. These include locking mechanisms
in the office and transportation as a few. This product line accounted for roughly
87.7% of their revenues in their most recent fiscal year. CompX’s brands include
traditional locks which include KeSet®, System 64®, TuBar®, and Turbine™, as
well as e-locks which include CompX eLock®, and also StealthLock®.
CompX International’s secondary product line is their recreational marine
components. This product line accounted for roughly 13.3% of their revenues in
their most recent fiscal year. CompX is an Original Equipment Manufacturer
(OEM) which makes the parts that are used in a company’s end product.
CompX’s productions of these parts are branded under various names.
Market for Company’s Products
The markets for CompX’s products include locksmith distributors, and
OEM customers.
Marketing Strategy and Customer Support
CompX has a marketing strategy of their engineers and sales people
partner with representatives within the respective companies they do business
with. CompX also relies heavily on their dealer network and how they present
their products to their customers.

5. Significant Customers
CompX’s customer base is diverse and the loss of any single customer
would not in itself have a material adverse effect on the company’s operations.
Production and Distribution
Manufacturing Process and Costs
CompX International utilizes a manufacturing process that allows them to
easily adjust for changes in consumer demand. One way in which they do this is
by diversifying the products they have produced for both commercial and private
institutions.
Distribution
CompX International has a large distribution network where many
distributors disseminate their product. This is possible by manufacturing and
packaging the product to be sent through the network.
Suppliers and Raw Materials
It should be noted that as many of the products CompX uses zinc, brass,
and steel components. This opens them up to the risks of the commodities
markets. CompX material costs accounted for 48% of their cost of sales in 2015.
Competition
Competitive Environment
CompX International mainly operates in two segments: security products
and marine components.
Both of these are part of highly competitive markets. However, their
security products have to compete with foreign and domestic competitors as
well as the competition involving the price of the raw materials, while their
marine components compete with small domestic manufacturers and limited
competition with foreign competitors.

6. Comparative Analysis of Competition
CompX International owns 3 of their manufacturing facilities and
currently leases their distribution center, which reduces the amount of
competition they are facing based on the company’s large plant, property, and
equipment owned or being leased.
CompX’s outstanding patents range from less than 1 year to 17 years as
of December 2015. This shows the company’s longevity of protection and
innovation of their products.
Financial Analysis
Financial Statement Analysis
Revenue Growth
CompX International has been growing their revenues by a CAGR of
6.43% over the last 5 years. This is a solid performance for a company like
CompX who is in a mature industry. This performance is attributable to CompX
International’s different revenue generators being diversified and not depending
on one another, as well as having their security products segment not being a
cyclical product, and having only the marine components segment acting cyclical.
Margin Analysis
CompX International has maintained their margins over time and has
showed stable operating margins and gross profit margins since 2012. CompX
International also had a large increase in their profit margin for 2012 and then
the profit margin returned back to more of an expected profit margin according
to other historical profit margins.

7. Application of Valuation Methods
Relative Valuation
From a relative point of view, CompX looks undervalued on the surface. It
currently trades a little more than 14 times its earnings, versus an industry average of
30.3 and the SP500 average of 23.99. The Price to Earnings Growth (PEG) multiple, looks
to agree when it comes to the Industry, but not the SP500 in this case. It is currently
3.05 for CompX versus the industry at 5.12 and the overall market at 1.96. Both of these
comparable values of CompX to the Industry and SP500 show that CompX is a company
that investors can invest in that will provide them with a lower Price to Earnings with
CompX instead of a higher Price to Earnings of another stock in the Security Services
Sector.
Revenue multiples for CompX again seemto show undervaluation. CompX
International trades at 1.21 times sales, versus an industry average of 1.75. A more
robust and consistent measure of value versus sales would be the EV/EBITDA multiple,
which for CompX is 4.54. The Industry has a EV/EBITDA multiple of 13.15 which is much
higher than CompX’s EV/EBITDA which shows that CompX might be undervalued. This
could be explained by CompX having no debt outstanding which would lower the
EV/EBITDA multiple.
Recommendation
Overall, CompX International is a strong company with involved management, and
consistent financials. The size of CompX as a company in general is smaller than other
companies in the Security Service Industry. This makes it seemlike CompX is not as strong of a
company to invest in, even though they produce better multiples that are more appealing to
investors than other companies in the industry and the industry itself. CompX has been able to
maintain strong financials and consistent revenues while using no debt in recent years. Relative
valuation shows that CompX International may be undervalued based on its multiples
compared to the industry. The current Book Value of the stock is $9.48. CompX has a Price to
Book Value of 1.12, while the Industry has a Price to Book Value of 3.284. The stock is currently
trading at roughly $10.70, which is not much higher than its book value and a much better deal
compared to other companies in the industry as a whole. I would say that CompX International
is undervalued, so my recommendation is to buy.