2/27/2011

Is Mr. Market Mispricing an Improving Capital Structure?

It’s Sunday so it’s back to the lab looking for that elusive superior valuation methodology. Sorry, I’m just making fun of myself and fantasying about leaving the dreadful day job. BTW, if you could benefit from additional or a more enhanced version of my efforts please send an email. John@shadowstock.com


TAYD: Taylor Devices

note the Market Cap and Enterprise value is only about 16 million.

Taylor Devices, Inc. designs, develops, manufactures, and markets shock absorption, rate control, and energy storage devices for use in various types of machinery, equipment, and structures.

Markets served: Industrial, steel mills, buildings, bridges, aerospace, defense, and automotive

TAYD may be an attractive candidate based on the following unique mixed of valuation improvements that appear to be ignored the market, IMO.

Enterprise value dropped 39% from 2006 {8.56 per share} to the current {5.19 per share}. The enterprise value decrease was the direct result of a growing cash balance .03 per share in 2006 and to the current .67 coupled with total liabilities dropping from 2.49 per share versus current .88. Share count was stable or just increasing about 1% over the 5 year period. This seems to indicate a responsible management team.

But add to these capital structure improvements an ROIC of 3.86% for 2006, 10.84% (2010) and 7.22% for the TTM. Gross margins improved from 29.24% (2006) to 33.96% (2010) and 28.08% TTM.

EV/Sales also saw improvement of 50% from 1.76 (2006) to a current .88.

Please click to view additional data

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