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Goodfellow posted a good first quarter. Revenue was down slightly, but management reduced expenses even more, improving margins substantially, from 0.9% net in Q12009 to 1.9% in Q12010. Quarterly earnings per share doubled from 12 cents to 24 cents. Cashflow from operations was positive before changes in non-cash working capital, but substantially negative after. Overall, including investing cashflows, the company used $8.4 million dollars, financed by bank debt. However, this was largely due to a seasonal increase in inventory.
Goodfellow remains good value at its current price.
Saturday, January 23, 2010
Thursday, January 21, 2010
Update on Caldwell Partners (CWL.A)
Caldwell released their first quarter results. The company burned through another $677K, leaving $9.4 million in cash and securities. Revenue increased slightly, but expenses increased more. Management continues to claim this is just them shoring up to take advantage of the recovery. I hope that's true. The company remains good value on paper, but time will tell if this a value trap or not. I continue to hold my shares.
Miranda Technologies (MT)
Miranda Technologies (TSX:MT) is another stock that shows up on our value screens. Miranda "develops, manufactures and markets high-performance hardware and software for the television broadcast industry. Its solutions are purchased by content creators, broadcasters, specialty channels and television service providers to enable and enhance the transition to a complex multi-channel digital and HD broadcast environment." According to the latest balance sheet, MT has $48 million in cash, $23 million in accounts receivable and $17 million in inventories. Property, plant and equipment equal $30 million. Applying some rough Graham mutiples (discussed previously) this gives us a liquidating value of around $85 million.
With the current share price of $5 against 22 million outstanding shares, that's a market cap of $110 million. Total liabilities are $37 million. So in theory you could buy the company outright for $147 million and liquidate it for $85 million. Obviously, this would be a stupid thing to do, but it does indicate that an investment in MT has some downside protection.
However, in the case for MT, the relatively cheap price vs. assets is only a bonus. The primary reason we like MT is that it has been a great cashflow generator. Cash flow from Operations over the past 5 full fiscal years (including changes in non-cash working capital) have averaged $21 million per year over the past 5 years; meanwhile capex has averaged only $3 million. That's a free cash flow of around 80 cents per share, on average, over the past 5 years. So far in 2009 the company remains cashflow positive at just under $2 million through Q3, despite the recessionary environment.
I profess no special knowledge -- actually, make that no knowledge at all -- about the future of MT's industry. Perhaps the recent glut of cash is a one-time thing driven by conversion of existing analog equipment to digital. Probably this is something a more enterprising investor should look into. But since I have a full time job and a family, it's not always possible to spend the time researching details such as this. Instead I assume that if that is indeed the case, that MT is facing terrible headwinds, then this fact is most likely already priced into the stock. After all, it is trading cheap by almost any standard, so the market is certainly pricing in a poor outlook. But, as Ben Graham and his followers have demonstrated time and time again, a diversifed portfolio of stocks that trade cheaply relative to their net asset value and past cashflow can deliver healthy returns. When the forecasted bad news becomes reality, the stock doesn't get hit much, it's already beaten down. But if there is any positive news, then the stock can come alive and increase substantially.
I do own shares in MT. This is not a recommendation that you purchase shares in MT. Please verify all the facts in this article yourself and consult an investment professional before making any purchases. As an amateur investor, I don't know if I have to put this stuff in or not but I figure better safe than sorry!
With the current share price of $5 against 22 million outstanding shares, that's a market cap of $110 million. Total liabilities are $37 million. So in theory you could buy the company outright for $147 million and liquidate it for $85 million. Obviously, this would be a stupid thing to do, but it does indicate that an investment in MT has some downside protection.
However, in the case for MT, the relatively cheap price vs. assets is only a bonus. The primary reason we like MT is that it has been a great cashflow generator. Cash flow from Operations over the past 5 full fiscal years (including changes in non-cash working capital) have averaged $21 million per year over the past 5 years; meanwhile capex has averaged only $3 million. That's a free cash flow of around 80 cents per share, on average, over the past 5 years. So far in 2009 the company remains cashflow positive at just under $2 million through Q3, despite the recessionary environment.
I profess no special knowledge -- actually, make that no knowledge at all -- about the future of MT's industry. Perhaps the recent glut of cash is a one-time thing driven by conversion of existing analog equipment to digital. Probably this is something a more enterprising investor should look into. But since I have a full time job and a family, it's not always possible to spend the time researching details such as this. Instead I assume that if that is indeed the case, that MT is facing terrible headwinds, then this fact is most likely already priced into the stock. After all, it is trading cheap by almost any standard, so the market is certainly pricing in a poor outlook. But, as Ben Graham and his followers have demonstrated time and time again, a diversifed portfolio of stocks that trade cheaply relative to their net asset value and past cashflow can deliver healthy returns. When the forecasted bad news becomes reality, the stock doesn't get hit much, it's already beaten down. But if there is any positive news, then the stock can come alive and increase substantially.
I do own shares in MT. This is not a recommendation that you purchase shares in MT. Please verify all the facts in this article yourself and consult an investment professional before making any purchases. As an amateur investor, I don't know if I have to put this stuff in or not but I figure better safe than sorry!
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