Alpha Pro Tech is an intelligent deep value investment in the tradition of Ben Graham. It has a $50 million market capitalization with an enterprise value of $36 million. Debt is a small lease.
The stock offers a unique investment opportunity - a strong financial position supported by 10 years of FCF profits and selling below its NCAV.
The company derives its revenue from two segments -- building supply products(~60%) and disposable protective attire(~40%). In most industries, disposable protective apparel is required.
Alpha Pro Tech (NYSE: APT) develops, manufactures, and markets building supply products. Their other segment is disposable protective attire (DPA). Technology, industrial and medical industries use protective apparel garments such as coveralls, face masks, gloves, and shields. Historically, the building supply segment accounted for 60% of total revenue—the remaining 40% is protective apparel. In addition, management noted many products develop through direct communication with end-users—coupled with FDA-approved facilities required to manufacture their products, creates a modest barrier to entry.
Alpha Pro Tech is an intelligent deep value investment in the tradition of Ben Graham. It has a $50 million market capitalization with an enterprise value of $36 million. Debt is only a small lease. APT offers a unique investment opportunity - a strong financial position supported by 10 years of FCF profits and selling below its NCAV.
I started an APT position. Although, an expected slowdown in the housing and protective garment industry may depress the stock price. But I will use market weakness to add to my existing position. Investors can expect a generous shareholder yield while holding the stock with a history of aggressive share repurchases. Management recently announced more funds committed to stock buybacks.
Note the sharp increase in sales during 2020,2021 and the reduction in 2022. The increased sales were from their Disposable Protective Apparel products. Now the effects of COVID-19 are normalizing. But government and company requirements may change. In addition to being a cheap BS and high earnings yield stock, the current valuation more than accounts for potential slowdowns. And to repeat, management offers shareholders a satisfactory return through consistent share repurchases.
The table below highlights Alpha Pro Tech as an investable value anomaly from a discounted net assets and earnings perspective. Notice the significant increase in book value and retained earnings per share. These positive results compare even more favorably to the decline in enterprise value per share over the same multiyear periods. Book value per share increased 110.74% from 12/2018 to MRQ. Retained earnings per share increased 129.75% over the same period. This contrasts with an enterprise value per share declining -69.72% from 12/2018 to the most recent quarter.
Net current assets trade at 75% of enterprise value. Additional value metrics are the low enterprise value to gross profit, tangible book value, earnings before interest and taxes, and revenue. These measures are at or near low historical and relative valuations.