In late 2023, I stumbled upon an opportunity that seemed too good to ignore.
Good Energy Group (LSE: GOOD), a UK-based renewable energy company, was trading at a price that suggested the market had either overlooked or misunderstood its true value.
With no significant debt and a market cap barely above its net-cash position, the stock was an obvious candidate for a deep-value play.
At the time, Good Energy was generating an average annual free cash flow of £7 million.
This meant that if I could buy the entire business at its market price, I’d recoup my investment in less than two years—a rare find for a cash-generating, publicly listed company.
Initiating the Position
Recognizing the opportunity, I initiated my first position in late 2023 at £2 per share. As the fundamentals continued to improve, so did my conviction.
By early 2024, Good Energy's free cash flow had increased to nearly £9 million annually. In response, I added to my position, raising my average entry price to £2.40 per share.
Valuation vs. Market Price
My intrinsic valuation of the business was a conservative £5.50 per share. With management executing a solid growth strategy, I was prepared to hold the stock for several years if needed.
The plan was simple: wait for the market to recognize the business's true worth and let it grow and expand in the meantime.
A Sudden Exit Opportunity
In November 2024, an unexpected turn came. Private equity firm Esyasoft approached Good Energy's board with an acquisition proposal.
After a lengthy due diligence process that stretched nearly 90 days, the offer was finalized at £4.90 per share.
Seeing minimal upside and a significant downside risk if the deal fell apart, I chose to exit my position at £4.80 per share—securing a 100% return in just one year.
Validating My Valuation Method
The offer price aligning closely with my intrinsic valuation further validated my approach to assessing business value.
This investment was a textbook example of my strategy: find deeply undervalued companies, hold patiently, and exit when the risk-reward balance shifts.
This was a slightly different case because the business had all the hall marks of a growth company, and I’m confident it’ll keep expanding under private ownership.
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