DCU: Oversold, Neglected, Ignored, Unloved and Illiquid but still has DeepValue

DCU Dryclean USA

Short on time tonight so I will give only a few pieces of financial data. I expect to add more.

September 14, 2008 I posted a few thoughts on DCU when it traded around .75. I believed it was a bargain so I was making purchases around this price.

Here are a few reasons why;

Top line:

They have EV/Sales of only .27; this compares very favorably to P/S of .91 (2004),1.1 (2005),.90(2006),.60 (2007),.30 TTM

GP/EV = 1.05% or we can say the company’s enterprise value is selling for the LESS than annual gross profit. The Annual gross profit is 5.80 million and the EV is ~ 5.283 million = Market Cap 5.84 Mil – Cash 4.149 Mil + Total Liabilities of 3.592 Mil = 5.283 Mil enterprise value.

Subtract A/R of 1.759 million and it brings the cost of buying the company down to 3.24 million. Annual sales were 20.39 million for the prior 12 months.

CFFO was strong at 1.342 million for the last 12 months and FCF was 1.28. CFFO/EV = 25% and FCF/EV = 24%. EBITDA/EV = 16.09%, EBITDA = 885.91k
OI-Taxes/EV = 8%, OI/EV = 14%,

Float total value based on EV = 1.436 million
Profit Magin 2.92%, Operating Margin = 3.71%
Tax/OI = 45%

-9.40% = Qtrly Rev Growth

ROA = 4.98%

Earning Quality represented by CFFO/NI was positive with CFFO of 1.342 million over the last 12 months compared to reported NI of 596.13k

EV/MC = 5.84/5.283 = .902


ragnar said...

There is no doubt that DCU is freakishly undervalued. After today's press release, it is good to see that they are still relatively profitable. In fact, year over year, they earned more money in the last quarter than they did in the same one a year ago.

I find it crazy that there are companies like DCU, ELST, and DRAM that are trading for not only a fraction of their worth, but also for little more than their cash-debt. Oh well, it's more money for us.

Keep up the good work, this is one of my favorite blogs.

shadowstock said...

I really appreciate you comments and insight! Thanks!

Your positive feedback motivates me to keep posting.

Ha ha, yes I believe DCU is freakishly undervalued. Buy a basket of these deep value stocks and you should do okay.DRAM and ELST.OB are in my basket of nano cap value.