“the Midas touch”

Important MDS information

The Midas Story:

Midas, (MDS)

Many of us remember the commercial “the Midas touch”. We believe the brand name has value not represented in the current price. But this is not the main reason the stock may be selling at a discount to intrinsic value.

MDS was trading around $12 5 years ago and the current price of 14 looks cheap.

Although we don’t give macro analysis much weight but the obvious should be pointed out. The cut back in the purchase of new cars could be a push for repair shops such as Midas.

EV/Sales are a modest 2.09 with year over year quarterly sales growth of 8.70%. The price to sales ratio of 1.20 is trading at a discount to the prior 4 years. P/S was 2.1 in 2006, 1.6 in 05 and 04. The return to the mean factor is a real possibility, YTD ~-6.00%, and since 2005 has is down 6.80%. PPE/EV = .24

“Midas owned 223 retail locations, leased 500 locations and used other forms of real estate control over an additional 694 locations.” This was taken from the recent 10k.

Short position over the past month dropped about 11.35% from 1,410,000 in the prior month to 1,250,000 in the current month or 9.6% of outstanding float.

ROA = 9.06%, CFFO/NI over the past 12 months is a very healthy 2.76 indicating the high quality of reported earnings.

The dilution story is outstanding, there are few companies can say they have reduced the shares outstanding form prior years. 13.90 million Shares outstanding in the most recent quarter versus 16.10 million for 2004. This will have a powerful impact in increasing future EPS.

CFFO/EV = 27%, FCCF/EV = 7.06% this generous cash flow has allowed the company to regularly buy back shares. EBITDA/EV = 7.97%.

MDS has a solid list of value institutions buying at higher prices. This is a list of ownership filed in the 04/28/08 proxy.

Mario Gabelli and affiliates own 17.3%, Silverstone Capital 9.56%, Keeley Asset Management 9.56%, RGM Capital 6.68%,