$15.97
$24.78
bear $15.97
base $20.23
bull $24.78
margin of safety $12.50
market price* $17.81
Gencor Industries, based in Orlando, Florida, builds the equipment used to make and lay asphalt: hot-mix asphalt plants, industrial combustion systems and heat-transfer equipment, and, since its $13.8 million purchase of the Blaw-Knox line in fiscal 2021, asphalt pavers. About 89% of fiscal 2025 sales of $115.4 million were in the United States and about 11% in Canada. Demand follows road-building budgets, so orders swing widely from year to year. The company has no debt. It also holds a large portfolio of marketable securities managed by an outside investment firm. How we measured earnings. Gencor runs its securities purchases and sales through operating cash flow. In fiscal 2025, $18.5 million of securities purchases made reported operating cash flow look like only $3.1 million. We treat those purchases as investments, not operating costs, and strip out swings in inventory, contract assets and customer deposits. On that basis, owner earnings were $0.97 per share in fiscal 2025 and $1.04 in fiscal 2024. Those figures include interest and dividends on the securities. We value the securities separately at market, so we also remove their after-tax income to avoid counting it twice. That leaves earnings from the equipment business alone, per share: fiscal 2016 $0.62, 2017 $0.53, 2018 $0.72, 2019 $0.52, 2020 $0.16, 2021 $0.01, 2022 $0.10, 2023 $0.69, 2024 $0.79, 2025 $0.72. This is a cyclical business, so we use the full ten years, which include the 2020-2022 slump. In that slump, fixed-price orders were squeezed by cost inflation and the company built up inventory. The ten-year median is $0.57 per share (about $8.4 million), and that is our normal earnings level. The company pays no interest, has had no stock-based pay since fiscal 2021, and has no meaningful acquired intangibles that wear out. Recent results. Earnings from the equipment business fell about 10% in fiscal 2025. In the first nine months of fiscal 2026, operating income fell 7.8% to $13.1 million on revenue down 5.6% to $91.2 million. Backlog was only $28.2 million at September 30, 2025. However, the company reported a record backlog of $79.2 million at June 30, 2026, and June-quarter revenue rose 25% to $33.8 million. The last comparable backlog, $72.2 million in September 2024, came before fiscal 2025 earnings of $0.72. So in the base case we set next year at $0.68, about 5% below fiscal 2025 and a smaller decline than last year's. We give no credit for growth beyond that. Gencor has never shown a steady, repeatable growth engine; its revenue rose because of highway funding, inflation and one acquisition. Base case: $0.68 per share next year and $0.62 the year after as the backlog is worked off, then the ten-year normal of $0.57 indefinitely. Why indefinitely: Gencor has made road-building equipment for decades without debt, and federal highway funding has continued since 1956, through short-term extensions when needed. The equipment business is worth $9.71 per share. It owes nothing. Cash of $26.3 million and securities of $137.9 million at June 30, 2026, less $10 million kept for operations, add $10.52 per share. Total: $20.23 per share. Bear case: the federal infrastructure act was scheduled to expire on September 30, 2026, and the company lists this as a risk. In this case, replacement funding is delayed or smaller and the 2020-2022 squeeze repeats. The record backlog still converts, giving $0.60 next year. Earnings then drop to $0.10 for three years, recover only to $0.45, and fade out after thirty years as larger competitors take share. The business is worth $5.45, with no debt and $10.52 of net cash: $15.97 per share. Bull case: the backlog delivers earnings back at the fiscal 2024 level of $0.80 for two years. After that, margins hold at their 2023-2025 level of about 10% of sales, and sales rise about 3% a year, well below the company's 5.7% yearly revenue growth since fiscal 2016. That takes earnings from $0.73 to $0.90 by year ten, held flat afterwards. The business is worth $14.27; plus $10.52 of net cash, $24.78 per share. All three cases discount at 6%. Cash and securities make up about half of the base-case value and two-thirds of the bear-case value, so the downside is unusually well protected. The risk is that this cash is never put to work for owners. The company pays no dividend, does not buy back stock, and holders of the Class B shares elect about 75% of the board. Auditors also gave an adverse opinion on internal controls at September 30, 2025, mainly over information-technology access and the period-end close. The fiscal 2024 annual report was filed about six months late, in June 2025. The fiscal 2024 figures were unchanged in the next annual report, and the cash-flow statements reconcile exactly. For this estimate to be wrong on the downside, the funding gap would have to last well beyond three years, or the securities portfolio would have to be lost or spent badly. Changes since our previous estimate. In August we put the shares at $11.05 / $17.23 / $34.86. That analysis measured earnings after the securities purchases and inventory swings, which made normal earnings look like about $0.15 per share. It also discounted at higher rates. Measuring the equipment business on its own raises the bear and base cases, and net cash has grown to $164 million from $136 million. The bull case is lower because we no longer credit years of 7% growth from an infrastructure law that was due to expire in September 2026.