Buying opportunity at GKN

That's because there's fundamentally nothing wrong with the underlying business. Organic sales rose 7 per cent in the first quarter and underlying trading profit, which ignores last year's hefty restructuring charge, grew by 2 per cent to £166m. Add back the £9m lost translating earnings in weaker overseas currencies into pounds and profit rose 8 per cent. True, currency fluctuations capped overall sales growth at 1 per cent, and chief executive Nigel Stein predicts "more modest" organic growth for the rest of 2014 given tough comparisons, but analysts expect earnings will grow fast.

Broker JPMorgan Cazenove estimates adjusted EPS will increase by 10 per cent this year and 12 per cent in 2015, far better than the company's peers. That puts the shares on about 13 times forward earnings which represents a 20 per cent discount to engineering sector peers, based on borker Numis's forecasts. The price seems to have caught the eye of new finance director Adam Walker who has spent over £250,000 on shares at 389p.

GKN's underperforming share price - down 5 per cent against the FTSE All-Share index since the end of February - is largely explained by GKN's high beta, a measure of volatility versus a given market. Supplying highly cyclical industries means its fortunes are heavily geared to the wider economy, so a slowdown in China and warnings on growth both from the IMF and World Bank cause jitters.

But many of GKN's markets are improving. It makes driveshafts and other key parts for the big motor manufacturers. Its differential gears are found on every car and its sideshafts are used on almost four-fifths of all light vehicles. Forecasters at IHS Automotive predict a compound annual growth rate for the industry of 3.8 per cent out to 2018, and GKN consistently outperforms the market.

The evidence is clear in this month's first-quarter results. Global car production grew almost 5 per cent during the first three months of 2014, yet GKN's Driveline division, already the engineer's biggest money-spinner by turnover, grew organic sales by 14 per cent over the same period. Japan's incentive scheme and strong demand in China drove trading profit, excluding last year's restructuring charge, up 9 per cent to £71m. Yes, Japan's stimulus is no long-term fix, but US sales are picking up after the bad weather there, and Europe is growing again - up 8.4 per cent in the first quarter.

GKN's other auto business - Powder Metallurgy, which makes parts by fusing metal powder - generated organic sales growth of 8 per cent. It grew faster than auto production everywhere except Brazil, and improving margins from 10.4 per cent to 11 per cent meant double-digit growth in profit before restructuring to £26m. And despite weak agricultural demand hitting the smaller Land Systems unit, a pick-up in European industrial and US heavy construction activity could mark the bottom here.

Of course, GKN has huge potential in the air, too. It was the main peg for our previous buy tip, and the integration of Volvo's impressive aerospace business has gone well. Making lightweight composite wing parts for Airbus and Boeing helped first quarter organic sales fly up 5 per cent. Both plane manufacturers have colossal backlogs and further big orders are inevitable. They're already ramping up production of single-aisle planes and of Boeing's larger 787 and the Airbus A350, both of which are more valuable to GKN - about $3m (£1.8m) each.

Military jets, now less than a quarter of aerospace sales, were flat, but are still tipped to fall this year, perhaps by mid-to-high single-digits. The US decision to wind-up production of the lucrative C-17 transporter three months early will not help, but Lockheed Martin will make far more of the F-35 Joint Strike Fighters next year, all fitted with $2.5m of GKN parts.