Gencorp Inc (GY), Petroleo Brasileiro Petrobras SA (ADR) (PBR): High-Quality Companies You Should Consider

The company is poised to nearly double its size through the highly profitable acquisition of Pratt & Whitney Rocketdyne, and I think it should also fetch a much higher valuation. The addition of Rocketdyne will provide Gencorp Inc (NYSE:GY) with a dominant position in space launch engines.

After the Rocketdyne acquisition, Gencorp Inc (NYSE:GY) will enjoy +80% market share in domestic medium and large rockets for launch vehicles, 70% market share in missile defense propulsion systems, 75% market share in tactical missile propulsion systems, and +80% market share in in-space propulsion systems.

Additionally, Gencorp Inc (NYSE:GY) owns 12,000 acres of land outside of Sacramento, of which it could sell half over the next several years. Adjusting for this valuable land, which could be worth over $300 million, the stock trades at only 4.5 times EBITDA. Moreover, Gencorp Inc (NYSE:GY) generates an ex-land 24% Free Cash Flow yield. I think it is a great opportunity for any investor who expects growth and value.

Foolish bottom line

In the long term, at current market prices, these two companies will end up being good investments. That said, I am looking at them now because I think there are short-term catalysts that might empower their value. Only time will tell, but I am about to take my chances right now.

Federico Zaldua has no position in any stocks mentioned. The Motley Fool recommends Petroleo Brasileiro S.A. (ADR). Federico is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article High-Quality Companies You Should Consider originally appeared on Fool.com is written by Federico Zaldua.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.