BUSINESSWEEK ONLINE : AUGUST 30, 1999 ISSUE
BUSINESSWEEK INVESTOR -- INSIDE WALL STREET

One Word: Plastics


It's a lazy summer afternoon. You're grilling steaks on the barbecue while sipping an ice-cold beer and chatting with friends you invited to enjoy your new backyard deck--a plastic lumber deck. O.K., it sounds a little tacky. But if you can get by the plastic thing, take a look at U.S. Plastic Lumber (USPL), the premier producer of this product. The Nasdaq stock now sells at 7 5/8, down from 10 earlier this year.

CEO Mark S. Alsentzer says a 12-by-16-foot deck built with his plastic lumber costs about $3,400, vs. $3,000 for pressure-treated wood. But plastic doesn't splinter, chip, or rot, nor is it subject to insect infestation, and you don't have to paint or stain it. There's an environmental plus, too. Not only does it save trees, but it is made from recycled plastic. Home Depot (HD) introduced the product in 22 California stores, and Alsentzer says the chain is adding it in Hawaii and Chicago area stores. The company is ramping up, too, quadrupling capacity and planning to take plastic lumber sales from $44 million this year to $112 million next.

That's not all. About 60% of USPL's revenues come from its Clean Earth unit, which dredges and then decontaminates toxic sludge, turning it into a cement-like substance for such uses as restoring strip-mined areas. It recently won a dredging contract for the New York harbor.

With a market cap of less than $200 million, this Boca Raton (Fla.) company is barely on Wall Street's radar. Lancer Partners, a hedge fund, is the largest outside shareholder, with 2.2%. Insiders own about 30% of the stock.

William S. Brennan of Pacific Growth Equities, an institutional research boutique, thinks the company will be getting more attention as it builds earnings. Second-quarter profits hit 7 cents a share fully diluted vs. 2 cents a year ago, restated for an acquisition. His target for the stock: 16 a share within the next 12 months.

BY JEFFREY M. LADERMAN

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