This post began with a focus on uncovering value by focusing on capital structure improvements with no equivalent intrinsic value market price change.
The search began by using the ratio enterprise value/market capitalization from 2013 to the most recent quarter. Companies reducing enterprise value by increasing cash or reducing liabilities with no market recognition of value improvements were included. So if the EV/MC ratio in 2013 is less than most recent quarter EV/MC these ideas removed. Further, I eliminated companies increasing shares outstanding. Short as a percentage of float greater than 5% filtered out. The average decline in stock price for the 6 stocks selected was -31% over the ~3 year period. Included were historical valuations trading at large discounts using P/B, EV/Sales, and other value criteria.
Commentary and additional analysis will be added during the week. Tonight is an introduction to deep value stocks, over sold, tiny micro capitalization, financially sound.
Stanley Furniture Company Inc. (STLY, Financial) “is engaged in the design, marketing and sourcing resource in the upscale segment of the wood residential furniture market. Its products include dining, bedroom, living room, home office, home entertainment, and accent items.” (Source: Morningstar)
Stanley Furniture is a financially strong transformation play. The most recent quarter reported a decline in sales and losses as expected. They wait longer than expected for new product introductions and new production factory in Vietnam. STLY is transforming from a domestic manufacturer to a marketing, distribution with overseas sourcing.
During the first quarter STLY surrendered its corporate life insurance policies. The company received 22.40 million in tax free cash due to 23.40 million in net operating loss carry forward. STLY sells for an enterprise value of $.74 or 10.87 million. This compares favorably to TTM gross profit of 13.243 million or EV/GP of .82. See the table below for multiple margin of safety attributes EV/Revenue of .20, P/TB of .83.
Cumberland Pharmaceuticals (CPIX, Financial) “is a specialty pharmaceutical company. It is engaged in the acquisition, development and commercialization of branded prescription products. Its target markets are hospital acute care and gastroenterology.” (Source: Morningstar)
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Onvia Inc. (ONVI, Financial) “is a provider of business information and research solutions that help companies plans, markets and sells to government agencies throughout the United States.” (Source: Morningstar)
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FreightCar America Inc. (RAIL, Financial) ”is a manufacturer of aluminum-bodied railcars in North America. The Company specializes in production of coal cars.” (Source: Morningstar)
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Negative Enterprise Value Idea
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Pendrell Corporation (PCO, Financial)Â ”through its subsidiary, invests, acquires and develops businesses with technologies that are protected by intellectual property (IP) rights.”
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Negative Enterprise Value Idea
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Emerson Radio Corp. (MSN, Financial)Â ”designs, sources, imports and markets housewares and consumer electronic products and licenses its trademarks to others for products domestically and internationally.” (Source: Morningstar)
