GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

2009 Best Small Companies (Part 5): Lufkin Industries, K-Tron International Inc, Houston Wire & Cable, Ansys Inc

November 30, 2009 | About:
This is a continuation of the series of valuing each of the 200 Forbes Best Small Companies.

You can find the list of stocks and the corresponding intrinsic values as calculated by me with the _ stock value calculator.

2009 Forbes 200 Best Small Companies Part 1 | Part 2 | Part 3 | Part 4



In this list, I’ll list up the valuation results of companies 71-90.

Lufkin Industries (LUFK)

lufkin-equipment.jpgLufkin sells equipment related to oil field and power transmission such as rod lift equipment used to extract crude oil and other fluids from wells and high-low speed gearboxes for industrial applications.

Company is very profitable both top and bottom line of the financial statements. Owner earnings has seen massive growth at more than 50% over the past 5 years. CROIC however, is good, but not as good as it should be considering how owner earnings is so high.

Other fundamental numbers are great as well. Margins are excellent and the slowdown didn’t seem to affect the business.

The one thing that caught my eye was the huge increase in intangibles up 400% from the previous year. Lufkin may have bought companies at a cheap price during the recession but whether they can combine all those companies together properly is something to be analyzed more thoroughly.

lufk-chart.gif

K-Tron International Inc (KTII)

ktron_prducts.jpgRegular readers are probably sick of me mentioning what a great company K-Tron is. You can read all the details in the KTII stock analysis.

I sold KTII earlier this month but I made a mistake by not re-evaluating the stock analysis and my position based on the latest quarterly and annual data. Previously I had calculated the value of the stock to be worth $110 but after running through the numbers again, seems like the intrinsic value has increased to around $125.

Cash flow, FCF, owner earnings is always constantly increasing and with a large part of revenues coming from international regions, revenue is well diversified as well as their products lines. The company is probably top few in all the niches it operates in and management is top notch.

They don’t offer guidance or even hold any conference calls which indicates that management isn’t trying to please anyone on Wall Street.

I’ll be providing some more reasoning on KTII in the next November performance update in the next couple of days.

ktii-chart.gif

Houston Wire & Cable (HWCC)

hwc.gifDistributor of specialty wire and cable, and related services to the United States electrical distribution market.

First of all, without jumping into the details, HWCC looks to be real cheap from a stock valuation standpoint. But for some reason a red flag for me at the moment is that the financial statements does not state how much the company has in cash. The beginning and end of period cash value is defined as a dash..

Definitely something to look into.

hwcc-chart.gif

Ansys Inc (ANSS)

54ansys.gifAnsys develops engineering simulation software.

The company has seen explosion of free cash flow growth and the CROIC is phenomenal at 42.1%. In other words, for every $1 dollar invested, management is able to generate a return of 42c. Not to mention how every $1 of sales is converted to FCF.

But again, while ANSS exhibits some outstanding numbers, intangibles has gone up more than 100% from the previous year and about 300% from 2005. In the event ANSS has to write down these intangibles, it could offer a nice entry point.

anss-chart.gif

List of the Best Small Companies

View all of the first 90 companies.

Disclosure

No positions in any stocks mentioned at time of writing.

Jae Jun

Old School Value.

About the author:

Jae Jun
Jae Jun is the author of Old School Value, a value investing blog dedicated to the Old School methodologies and teachings of the investment greats such as Graham, Buffett and Fisher. The blog deals with finding intrinsic value, fundamental stock analysis and special situations including spinoffs and merger arbitrage.

Visit Jae Jun's Website


Rating: 3.0/5 (5 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Email Hide