1.4x FCF And Trading at 60% of TBV
This is also a high-quality business with a 5Y dividend yield of almost 40%.
Mr Deep-Value also offers:
A 90%+ discount off Bloomberg’s No.1 competitor
Separately managed accounts for US clients
Introducing today’s stock:
NCAV Ratio = 6.3
TBV Ratio = 0.6
EV/5Y FCF Ratio = 1.4
P/5Y FCF Ratio = 1.8
I explained my calculation of fair value in this post. For this business, I estimate there to be almost 300% upside from today’s price.
There is also at least 50% upside to the liquidation value of the business.
If we calculate the cash paid to shareholders in dividends over the last 5 years, the average annual yield, at today’s market cap, is 39.83%.
The 10-year figure is 27.87% and the 20-year figure is 17.97%.
The business has virtually no debt and $50m of cash in the bank on a market cap of around $480m.
Over the last 5 years, its FCF has averaged $269m per year (10 year avg = $232m, 20 year avg = $135m).
This is a solid business that, under normal circumstances, throws off lots and lots of cash.
Its core product is in global demand, which is expected to grow and grow over the next decade.
Annnnd, I know what you’re thinking….
I said ‘under normal circumstances’ so there must be some sort of dirty little catch.
Which, of course, is correct.
In fact, as I dug deeper into the story behind this business, and its recent sell-off, the story became darker and weirder.
This is a very unusual situation because there are essentially no issues with the business itself.
All of the ‘weirdness’ comes from external sources. Stuff that’s beyond the control of the management team, but also, insanely irrational.
I bought this stock because I believe that everything is lined up to generate a significant return for patient investors.
Welcome, ladies and gentlemen, to the second weirdest story I found this year (No.1 is here)...