3/17/2011

Value Improvements Possibly Overlooked

This is a continuation of the prior post looking for under appreciated financial metrics.

I looked at the 4 year average 2006 to 2009 and then compared to the TTM amount for share count, total liabilities and cash. My filter started with only those stocks reducing share count, total liabilities, and building cash in combination.

Additional criteria were added to the filter; average EBIT/EV from 2007 to the TTM and this average earnings yield was compared to the TTM EBIT/EV and only those with a TTM earnings yield less than the average 07 to TTM were selected. The thought was if the current earnings yield was less than the average 07 to TTM then there was an additional opportunity for the stock trading at less than normalized earnings. The discount to normalized earnings was modest as most stocks have come back significantly from the 2008 lows. Some other criteria added was SGA/Revenue less than 30% to help avoid investing in companies with management greed, shorts as a percentage of float was also considered with measures less 3%, negative 52 week stock return with mean reversion possibilities, positive FCF/Sales and ROIC were some of the other measures considered.

CENT: Central Garden & Pet Company

Current price = 8.86

EV = 1,034,264,500 ; Market Value = 523,750,000;

Cash increase
Cash Balance = 106,780,000
Average cash Balance 2006 to 2009 = 60,110,000

Share count reduction
Share count TTM = 62,480,000
Average Share count 2006 to 2009 = 70,620,000

Liability reduction

Current liabilities = 605,193,000
Average liabilities balance 2006 to 2009 = 706,500,000

mean reversion candidate
52 week change = -15.20%

Average 07 to 09 FCF/Sales%= 8.48
ROIC TTM = 4.29%

potential small discount to normalized earnings
Average 07 to TTM EBIT/EV = 10.52%
TTM EBIT/EV = 9.79%


AHCI: Allied HealthCare International Inc.


Current price = 2.38
EV = 101,692,700 ; Market Value = 103,700,000

Cash increase
Cash Balance = 34,639,000
Average cash Balance 2006 to 2009 = 30,185,000

Share count reduction
Share count TTM = 45,270,000
Average Share count 2006 to 2009 = 45,072,500

Liability reduction
Current liabilities = 31,458,000
Average liabilities balance 2006 to 2009 = 47,000,000

mean reversion candidate
52 week change = -13.62%

Average 07 to 09 FCF/Sales%= 3.90%
Average ROIC 2007 to TTM = 6.21%

potential small discount to normalized earnings
Average 07 to TTM EBIT/EV = 12.39%
TTM EBIT/EV = 10.47%


CRMT: America's Car-Mart Inc.


Current price = 23.96
EV = 338,946,000 ; Market Value = 254,370,000

Cash increase
Cash Balance = 268,000
Average cash Balance 2006 to 2009 = 208,000

Share count reduction
Share count TTM = 11,317,000
Average Share count 2006 to 2009 = 11,870,000


Liability reduction (did not pass the liability reduction)
Current liabilities = 75,182,000
Average liabilities balance 2006 to 2009 = 58,561,443

mean reversion candidate
52 week change = -4.88%

Average 07 to 09 FCF/Sales%= 1.52%
Average ROIC 2007 to TTM = 11.15%

potential small discount to normalized earnings
Average 07 to TTM EBIT/EV = 7.30%
TTM EBIT/EV = 6.34%

Other potential ideas
SVT: Servotronics, Inc


Current price = 8.56
EV = 19,108,000 ; Market Value = 16,790,000

These are also worth a look
BKR ($27.57), INOD ($2.49), ITI($1.45),SPIR ($4.51)

1 comment:

Anonymous said...

Thanks for the information on JVA. It's up big since you introduced the company. After reading your post and looking into this great family owned business, I happly bought a few shares. Teresa