9/12/2010

Companies potentially building value in the Shadows of Wall Street?

For this weekend I wanted to find companies with heavy debt loads. Not very Graham and Dodd like place to start looking for ideas. But the thought was highly leveraged companies focusing on aggressive reduction of debt, buying back shares, reducing over head expenses; capital expenditures reductions are overlooked compared to the marquee metrics like P/E ratios.


In an effort to provide useful data I created a downloadable spreadsheet with 47 symbols that focuses on highly leveraged but with positive EBITDA since 2007 and share count reductions from 2008 to the TTM.

Please click to view, get quotes and if wanted download the excel file. the spread sheet data  has ~ 178 points of financial data for all 47 ideas. Now you can create your own filters, pivot or approach to work with these 47 pre filtered ideas.

Click



This is how some of the search was further developed. It’s broken down as follows,

1) The first filter was to take the enterprise value to market capitalization (EV/MC > 3.50). Hopefully the high debt loads would force discipline to make more judicious use of their capital. Excessive cash may encourage foolish spending or excessive salaries.

2) Then I drilled down further to select only companies lowering debt with the ability to reduce over the past few years. My test for this was to take total Liabilities / EBITDA average over the past 3 years and only companies with average EBITDA from 07 to TTM greater than zero.

3) Long term share holder friendly capital allocation. Add additional focus by selecting companies buying back shares and reducing share count. This test was met by only selecting ideas where share count was being reduced from 08 to the TTM.

Please click to see some of the results


Then I added the following to the above CRITERIA

4) Gross margin increasing taking the average gross margins over 07 to 09 compared to the

TTM.



Please click to see some of the results


Then I added the following to the above CRITERIA

5) Lowering general administrative expenses by using SGA/Revenue. SGA/REV TTM > Avg SGA/Rev (2007-2009)

Please click to see some of the results


Looks like in the initial data dump media companies like, CMLS, ETM, EVC,LEE that have been unjustly puninshed recently were included in the list.

also noticed PFIN (turnaround micro cap candidate), TRBR (turnaround micro cap candidate/Shipping)

good luck with the data

2 comments:

walterlu said...

Nice article. Just wondering, where can I get data like this? Thanks.

ShadowStock said...

Hi Walterlu

Thanks! I did include the ability to download data enabling you to do your own analysis.

http://www.shadowstock.com/ss_091210DataDump.html

Seems no reader was interested.

To answer your question, I take the data from filings by using my custom programs and load into my datamart. Using existing screeners (Yahoo, Schwab, MSN, etc) can get you close to the same end results.

Good luck
John