11/02/2014

Mean Reverting Candidates, Financially Strong


“ The stock of high quality companies is driven so high that long-term returns are impaired even assuming the high rates of growth and profitability persist. The corollary is also true: A company with an apparently poor business will generate an excellent return if the market price underestimates its fair value even assuming the low growth or profitability persists. These findings reveal an axiomatic truth about investing: investors aren’t rewarded for picking winners; they’re rewarded for uncovering mispricings—divergences between the price of a security and its intrinsic value. It is mispricings that create market-beating opportunities. And the place to look for mispricings is in disaster, among the unloved, the ignored, the neglected, the shunned, and the feared— the losers. This is the focus of the book.” Source  Deep Value: Tobias E.Carlisle


All the stock below have a negative 3 year stock price return coupled with a significant improvement in valuation using enterprise value to total noncurrent assets from the MRQ to the 2012 fiscal year end valuation EV/Total NonCurrent Assets. Share count reduction from 2012 to the MRQ with only 1 exception reporting a stable share count. Furthermore, all ideas have an EV/EBIT under 9. Note the other valuation improvements for P/TB or EV/Revenue. 
































































Enterprise value / Non Cash asset valuation has significantly improved from 2012 to the most recent quarter. Additional AVERAGES for the group; EV/EBIT = 7.24, YTD return = -23.83%, 3 year return = -11.29%, Z score 9.34. 



Coach, Inc. (COH) : Post date price = $34.88, 
Price on 11/27 = $36.66, % change = 6.63%


“Coach, Inc. (Coach) is a marketer of accessories and gifts for women and men. The Company offers a range of modern, fashionable handbags and accessories. Its product offerings include women’s and men’s bags, accessories, footwear, wearables, jewelry, travel bags, sunwear, watches and fragrance.” Source Google Finance 


CARBO Ceramics Inc. (CRR):  Post date price = $51.67
Price on 11/27 = $45.76


“Carbo Ceramics Inc is a supplier of ceramic proppant. It provides fracture simulation software, fracture design, engineering and consulting services and a broad range of technologies for spill prevention, containment and countermeasures”. Source Morningstar



Trading at a historical discount for valuation on price to book and revenues.

Mean reverting attributes, 52 week change = -58.94%, 3 Year return = -25.98, 
5 Year return of -.58%

Industry:Oil and Gas Equipment Services

Market Cap: 1.16B , Enterprise Value:   1.16B
Price/Book (mrq): 1.51
Enterprise Value/Revenue:  1.79 , Enterprise Value/EBITDA: 7.02
Profit Margin:  11.79% , Operating Margin : 18.07%
Revenue (ttm):  645.05M ,  Revenue Per Share (ttm):  28.11
Qtrly Revenue Growth (yoy): -22.90%
Gross Profit (ttm): 193.00M , EBITDA (ttm):  164.57M
Total Cash (mrq):   30.10M , Total Cash Per Share (mrq):   1.31
Total Debt (mrq):   0.00 , Current Ratio (mrq):    4.50
Book Value Per Share (mrq):  34.19
52-Week Change:   -58.94%
52-Week High(Jul 1, 2014): 156.00 , 52-Week Low (Oct 30, 2014): 47.01
% Held by Insiders: 14.58% , % Held by Institutions:   92.90%
Short % of Float (as of Oct 15, 2014): 24.00%
Trailing Annual Dividend Yield:   2.40% , 5 Year Average Dividend Yield: 1.00%



Computer Task Group Inc. (CTG): Post date price = $8.80
Price on 11/27 = $9.49, % change = 7.84%


“Computer Task Group, Inc., is an IT solutions and staffing services company with operations in North America and Europe. The Company's geographical area of operation includes North America and Europe.” Source Morningstar

Vaalco Energy Inc. (EGY):  Post date price = $7.42
Price on 11/27 = $6.27


VAALCO Energy Inc is an independent energy company, which is engaged in the acquisition, exploration, development and production of crude oil and natural gas.” Source Morningstar

ENGlobal Corp. (ENG):  Post date price = $1.31
Price on 11/27 = $2.65, % change = 102.29%


“ENGlobal Corp is a provider of engineering and other professional project services related to design, fabrication, procurement, maintenance, environmental and other governmental compliance and construction management”. Source Morningstar



EngGlobal aggressively reduced their long term debt from a 12/2009 long term debt balance of 6,149.000 to zero for the most recent quarter. Strong financial position with a F score of 8.

Market Cap = 56.89M, Enterprise Value = 39.66M, EV/EBITDA =6.33

Geospace Technologies Corporation (GEOS)
Post date price = $30.79
Price on 11/27 = $28.27


“Geospace Technologies Corp designs and manufactures instruments and equipment used by the oil and gas industry in the acquisition and processing of seismic data as well as in reservoir characterization and monitoring activities. Source Morningstar

Guess' Inc. (GES):  Post date price = $22.17
Price on 11/27 = $22.54


“Guess?, Inc. (GUESS?) designs, markets, distributes and licenses apparel and accessories for men, women and children.” Source Morningstar

Lifevantage Corporation (LFVN) : Post date price = $1.35
Price on 11/27 = $1.39

Lifevantage Corp is engaged in the identification, research, development and distribution of nutraceutical dietary supplements and skin care products including Protandim, TrueScience and Canine Health.Source Morningstar. Think of multilevel marketing. 


Aggressive recent share count reduction, the share count was reduced from 114,666,000 shares outstanding for the period ending 09/2013 by 11.40% to the MRQ of 101,594,000. The per share price change was -39.83% for the prior 52 week period. 
Note there was a large assumption of long term debt over that same period. 

National Presto Industries Inc. (NPK): Post date price = $63.06
Price on 11/27 = $59.70


“National Presto Industries operates in three business segments such as Housewares/Small Appliances, Defense Products & Absorbent Products. Its products include pressure cookers, kitchen electrics, precision mechanical & adult incontinence, among others.” Source Morningstar


North European Oil Royalty Trust (NRT) : Post date price = $18.29
Price on 11/27 = $15.61


“North European Oil Royalty Trust holds overriding royalty rights covering gas and oil production in certain concessions or leases in the Federal Republic of Germany” Source Morningstar

RPX Corporation (RPXC) : Post date price = $14.05
Price on 11/27 = $13.48


“RPX Corp. provides a subscription-based patent risk management solution that facilitates more efficient exchanges of value between owners and users of patents compared to transactions driven by actual or threatened litigation.” Source Morningstar

Tengasco Inc. (TGC):  Post date price = $.43
Price on 11/27 = $.42


“Tengasco, Inc.,is engaged in the business of exploration for and production of oil and natural gas. Its area of oil exploration and production is in Kansas. Its gas production area is the Swan Creek field in Tennesse.” Source Moringstar


No position in the stocks listed above

3 comments:

TheExtraIncome said...

I also follow COH and CRR but looks like they don't want to exit from this down-trend.

If I would do Value Investing for sure now they are selling at very good price.

They both also have an amazing Dividend Yield

ShadowStock said...

I would recommend a basket approach. Ease into positions with the thought you will buy more on weakness if fits into your portfolio.

My favorite in the group would be the tiny companies, CTG and TGC. Also like way oversold GEOS, No positions at this time.

TheExtraIncome said...

Unluckily I have too many commissions from my broker (I am from Italy) and to buy it in more steps will take a big percentage of the final result..

I prefer to wait for a good reversal pattern... hoping it will not jump of 50% in a day and that I will have time to enter..