Even though the stock market is currently trading at all-time highs, there are some equities that have missed out of the recent rally and may offer deep value at current levels based on various unique situations.
Asset sale
One of these companies is oil and gas industry supplier Flotek (FTK, Financial). This $100 million market cap stock develops and supplies chemicals and services to the oil and gas industries as well as to companies that make cleaning products, cosmetics, food and beverages, etc.
According to its last set of financial statements, the company has $107 million in cash on the balance sheet and a book value per share of $3.60. On this basis, the stock is currently trading at a price to tangible book value of 0.6.
The reason why the company has so much cash on the balance sheet right now is that it recently sold a non-core business, Florida Chemical. The company's latest trading update tells us that management is currently considering alternatives for the optimal allocation of net proceeds from this sale.
As the company is loss-making and reported a more than 50% decline in revenues on a year-over-year basis for the third quarter of 2019, returning this cash to investors should be high up on Flotek's agenda in my opinion. If the group does go down this route, shareholders could be well rewarded, especially if management decides to sell the rest of the business.
Record order book
Another small-cap that looks to offer deep value at current levels is aerospace industry supplier CPI Aerostructures Inc. (CVU, Financial).
CPI is a supplier of aircraft parts for fixed-wing aircraft and helicopters in both the commercial and defense markets in the United States.
The company is profitable, but revenues are lumpy, having increased at a compound annual rate of 0.2% for the past six years. Wall Street analysts are currently forecasting sales of $103 million for 2019 as a whole and a net profit of $8.5 million.
Earnings per share are expected to come in at $0.72 for the year. These figures put the stock on a forward price-earnings ratio of 9.4.
The company also has a strong order backlog. It reported a record total order backlog of $553 million at the end of its fiscal third quarter, up $86 million during the three months to the end of September 2019.
The company looks cheap on other metrics as well. As of Dec. 23, it has an EV to EBITDA ratio of 9.7 and a price to tangible book value of just 80%. The book value per share is $10.40.
New CEO
The third company is Gulf Island Fabrication Inc (GIFI, Financial). Gulf Island is a fabricator of steel structures, modules and marine vessels.
This $70 million market cap company is currently trading at a price-book ratio of 0.4 and has reported losses from operations since 2015. However, Wall Street analysts expect this to change in 2020. They are projecting a net profit of $12.1 million on revenues of just under $300 million for the year. These numbers put the stock on a forward earnings multiple of 7.6.
Only time will tell if the company can make good on these forecasts. Nevertheless, to help it meet these targets, Gulf Island recently appointed a new CEO to help move the company forward. Richard W. Heo is the new President and CEO of the group and brings with him 20 years of experience in the engineering industry. He previously served as Executive Vice President of Fabrication Services for Chicago Bridge & Iron N.V. The new management could be the catalyst the stock needs to re-rate over the next 12 to 24 months.
Disclosure: The author owns no share mentioned.
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