A Profitable US Business for 0.8x TBV
It's buying back shares at a furious pace and holds mostly liquid assets.
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Today’s stock is currently priced below its liquidation value.
At this price it values the operating business at zero, implying that it will never generate positive FCF for its owners ever again.
When I read through the reports however, I got a very different feeling.
First of all, this business is not burning cash.
It’s generating it, consistently, even on a TTM basis.
It also increased its profit margin last year, despite slightly lower revenues.
Best of all, the company is aggressively buying back the stock.
The share count has been reducing annually for decades, and last year alone, they retired around 7% of the outstanding shares.
The balance sheet is pristine with no interest bearing debts or obligations while the net-working-capital is virtually equal to the current market cap.
The business is facing cyclical-uncertainty.
But, as a real-world owner, there is nothing going on that would make me give this business away for less than the value of its tangible assets.
The valuation is absurd and the business is operationally healthy.
For a patient, deep-value investor, this is a pretty decent set-up.
Let’s take a look…