A Healthy, UK-Listed Business Priced At 1x FCF
There is also 600% upside to liquidation value at today's price.
Mr Deep-Value also offers separately managed accounts for US-Based, qualified investors.
Today’s UK-listed business:
TBV Ratio = 0.15
EV/5Y FCF Ratio = 1.1
P/5Y FCF Ratio = 1.4
The business has generated positive free cash flow in 9 out of the last 10 years, and I estimate the upside to fair value from current prices to be around 400%.
(My calculation of fair value is explained at the start of this post.)
The upside to liquidation value alone is almost 600%.
It’s very much a cigar-butt style investment, with a very high probability of having at least one significant puff left in it.
This is largely due to two factors:
First, the price.
We’re paying 1x FCF while having a huge margin of safety within the asset value.
Secondly, the industry it’s in is priced for long-term decline, despite having a pretty bright (and profitable) short term future.
I believe this is an asymmetric opportunity, and have recently allocated 5% of my portfolio to the stock.
Let’s dig in…