Potential watch list candidates: Small cap value

The few ideas below were generated using direct insider buying for the week ending 04/09

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Flow International Corp (FLOW) is the world leader in high pressure water jets used to cut various items such as wood or metal. FLOW manufactures, designs, sells, services and installs at industrial, semiconductors, aerospace, food and manufacturing entities. Their niche has enable FLOW to post high ROIC before taxes, 2008 15.49%, 2007 11.21% and 21.07%. The recession has crippled financial performance from 2009 to YTD 2010. Last week 2 insiders (Director and Officer) purchased $31,800 and $36,700 respectively. Margins have dropped and share count has increased over 2008/09.

CECE: CECO Environmental Corp continues to move higher on strong insider buying. The purchases have been highlighted in recent posts.


CECO provides air pollution control products and services to over 2,000 customers. The industry is highly fragmented. CECE is the largest provider of air pollution control products.

NUTR: Nutraceutical had some modest insider buying last week.


My comment on August 2009 were

Nutraceutical (NUTR) has successfully created shareholder value with a sensible capital allocation strategy. ROIC before taxes has averaged an enviable 21.58% for the past 4 reported fiscal years but has fallen to 13.81% for the most recent year end. The drop is not due to the margin compression that has actually risen from 52.56% in 2004 to 54.40% 09/08. The lower ROIC is directly attributable to SGA increasing 31.87% from 2004 coupled with sales improving 18.56% forcing operating margins to decline. But based on ROIC NUTR solidly outperforms its publicly held direct competitors: Schiff Nutrition (WNI), Natural Alternatives (NAII), NBTY (NTY), Natural Alternatives International (NAII) or Mannatech Inc (MTEX). At this point the profitability for NUTR is significantly higher than its peers and represents a bargain price with a current EBITDA/EV at 25.20%. Historical it has managed to keep its capital structure clean with a relatively constant outstanding share count over the past several years. The solid financial health is supported by years of well managed strong FCF.

1 comment:

Mark Perkins said...

hey, you might want to check out Silverleaf Resorts SVLF. It's well below net tangible assets here and is in play.