5/13/2011

Update: Ugly stocks selling at beautiful prices???

The other night I was unable to add additional supporting data or rational for the stocks listed.

The prior post's effort was to begin exploring companies improving value that may be overlooked. I thought following the allocation of cash flow to items like debt reduction, share buy backs and raising cash to lower enterprise value may go unnoticed as these improvements are slow, occur over time and not given the same market changing value as accrual earnings.

This update will also be short
CRV: Coast Distribution System

The enterprise value based on the month end prices during the 2006 fiscal year was ~ 12.69 compared to the current EV value of 6.45. The change in enterprise value was driven by several items.

Share count was 4.62 million at the end of 2006 reduced slightly to the current count of 4.54 million.

Total liabilities were 33.11 million at the end of 2006 reduced to the current balance of 16.70 million.

Cash increased to a current balance of 7.02 million from 1.74 million at the end of 2006.

The impact of a reduced share count, liabilities,increase in cash and market price drop significantly reduced the enterprise value compared to 2006.

2006 EV/Sales = .42

Current EV/Sales = .31

Gross margins declined slightly from a 2006 rate of 18.70% to 18.06%.

But the gross profit yield versus the enterprise value improved from 2006.

The gross profit yield(GP/EV) in 2006 was .54 improved to .70 (GP/EV) for the TTM.

So this thinly traded overlooked tiny nano cap with a negative 15% 52 week return may be offered at a bargain price based on the above improvements in enterprise value.

The current market cap is 17 million and the last divided was on September 2008.

TNDM: Neutral Tandem Inc

Dramatic jump in the GP/EV yield
2006 GP/EV = .12
TTM GP/EV = .30

GM% increased to 65.41% for a 2006 rate of 64.74

NAII: Natural Alternatives Internatio

slight reduction in share count from 2006

Large debt reduction from 29.16 million to the current 3.81 million

Cash increased from a 2.16 million for 2006 to the current 10.75 million
Average stock price for 2006 based on the month end prices was 8.76 to the current price of 4.54

A combination of the above reduced the EV from ~ 12.74 for 2006 to the current 4.22.

Valuation improved
EV/Sales 2006 = .87
To the current value of EV/Sales = .46

GM% declined slightly from 2006 of 18.08% to the current 21.92%

But the GP/EV yield has not improved from 2006

JRN: Journal Communications Inc
strong valuation improvements for

EV/Sales
2006 = EV/Sales = 2.42
2010 = EV/Sales = 1.27

and GP/EV
2006 GP/EV = .22
2010 GP/EV = .37

share count, liability reduction, liabilities and the market price decline all were reduced and contributed to the drop in the enterprise value

IFON and GTSI all saw valuation improvements based on the principles above.

Quotes on the above stocks

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