This post began with a focus on uncovering value by focusing on capital structure improvements with no equivalent intrinsic value market price change.
The search began by using the ratio of enterprise value/market capitalization. Then the period from 2013 to the most recent quarter selected. Companies reducing enterprise value by increasing cash or reducing liabilities with no market recognition of value improvements included. So if the 2013 EV/MC ratio is greater than most recent quarter EV/MC these ideas selected. Further, I eliminated companies increasing shares outstanding. Short as a percentage of float greater than 5% filtered out. The average stock price decline for the 6 stocks selected was -31% over the ~3 year period. Additionally, stocks included had large discounts to its historical valuations using P/B, EV/Sales, and other value criteria.
Click for the quotes on the stocks below: STLY,CPIX,ONVI,MSN,PCO,RAIL
Stanley Furniture Company, Inc. (STLY) “is engaged in the design, marketing and sourcing resource in the upscale segment of the wood residential furniture market. Its products include dining, bedroom, living room, home office, home entertainment, and accent items.” Source Morningstar
Stanley Furniture is a financially strong transformation play. The most recent quarter reported a decline in sales and losses as expected. They wait longer than expected for new product introductions and new production factory in Vietnam. STLY is transforming from a domestic manufacturer to a marketing, distribution with overseas sourcing.
During the first quarter STLY surrendered its corporate life insurance policies. The company received 22.40 million in tax free cash due to 23.40 million in net operating loss carry forward. STLY sells for an enterprise value of $.74 or 10.87 million. This compares favorably to TTM gross profit of 13.243 million or EV/GP of .82. See the table below for multiple margin of safety attributes EV/Revenue of .20, P/TB of .83.
Cumberland Pharmaceuticals (CPIX): “is a specialty pharmaceutical company. It is engaged in the acquisition, development and commercialization of branded prescription products. Its target markets are hospital acute care and gastroenterology.” Source Morningstar
Onvia Inc. (ONVI): “is a provider of business information and research solutions that help companies plans, markets and sells to government agencies throughout the United States.” Source Morningstar
FreightCar America Inc. (RAIL) :”is a manufacturer of aluminum-bodied railcars in North America. The Company specializes in production of coal cars.” Source Morningstar
RAIL is extremely cheap using any measure. Net current asset value near current market value, price to tangible book value is .73, EV/EBIT 1.20, no change in share outstanding back to 2013, EV/Revenue .10 and TTM gross profit of 93.93M versus an enterprise value of 83.71M.
Negative Enterprise Value Idea
Pendrell Corporation (PCO) :”through its subsidiary, invests, acquires and develops businesses with technologies that are protected by intellectual property (IP) rights.”
PCO trades below net cash. Current market price is $.51 per share versus .63 in net cash. Negative enterprise value of 30.36M per Yahoo finance, NOLs over 2 billion, valuable patents, PCO lost 2012 suit against Apple, filed appeal. No pensions or debt with head count reduced to 13 from 73 in 2013. Executive chairman Craig McCaw is worth 2 billion.
Negative Enterprise Value Idea
Emerson Radio Corp. (MSN) :”designs, sources, imports and markets housewares and consumer electronic products and licenses its trademarks to others for products domestically and internationally.” Source Morningstar