What is the cheapest stable stock you know of when measured by CURRENT EV/FCF?

[JAllen]

 

Just curious about what others know about. 

 

 

I'm writing up a slightly growing small stock that trades at EV/FCF of 7X (FCF is EBITDA - all capex) that has great management.  In the writeup I state that it's the cheapest stock we know of, so I'm curious how many other stocks are out there that are cheaper when using current EV/FCF to value them.

 

Where FCF equals EBITDA-CAPEX (or something similar like EBIT/operating income).

 

 

Please only list companies that are stable and not rapidly declining.

[Palantir]

George Risk Industries - RSKIA

 

MCap = 40M

Portfolio = 28.25

EV = 11.75 M

FCF = 2.1 M

 

EV/FCF = 5.6

[thelads]

Not sure if it fits or counts (and to be fair Maintenance Capex is very hard to estimate - should we be counting some recent acquisitions etc?) but maybe Samsung Pref Shares. 005935 KS.

[writser]

Solitron comes to mind as a US example. Lots of Japanese companies also trade way lower (example from this forum Murakami, EV/FCF ~1.65). Lots of stuff with negative / zero EV due to extremely conservative balance sheets. Not sure if that's what you are looking for though.

[Packer16]

Some cheap ones:

 

Intralot - 3.8x

Glacier Media - 5.6x

Alliance Healthcare - 6.4x

Hyundai HCN (cable co) - 3.8x

Lotte Chilsung (beverage co) (pfd) - 4.5x

Taeyoung E & C (construction & media co) (pfd) - 1.3x

BYC (branded apparel) (pfd) - negative

Daesang Holdings (food) (pfd) - 3.8x

 

Packer

 

[Hielko]

 

Just curious about what others know about. 

 

 

I'm writing up a slightly growing small stock that trades at EV/FCF of 7X (FCF is EBITDA - all capex) that has great management.  In the writeup I state that it's the cheapest stock we know of, so I'm curious how many other stocks are out there that are cheaper when using current EV/FCF to value them.

 

Where FCF equals EBITDA-CAPEX (or something similar like EBIT/operating income).

 

 

Please only list companies that are stable and not rapidly declining.

Almost every stock I own is cheaper than 7x EV/FCF... without checking the math:

 

Conduril

Conrad

PD-Rx

Awilco

Ming Fai

Argo

Beximco Pharma

[yadayada]

Keck seng I think. Possibly Enterprise if they can pull it off. But not that cheap currently.

 

Ocwen is also pretty cheap right now at around 5-6x FCF, but difficult to figure out their FCF at first glance.

[jwfm1985]

Macro Enterprises

[sleepydragon]

deere

 

[Patmo]

ITT Tech (ESI) is currently the cheapest I know of. But you have to go by the 2013 FS which are in the process of being restated to consolidate the PEAKS program, a pretty sizeable beast. $215 million senior debt, but the PEAKS trust has an unknown amount of assets (student loans receivable) intended to be used to service this debt. The company estimates that a sizable amount of receivables intended to be applied against the debt is impaired.

 

Anyway, excluding the PEAKS program, ESI trades at 1x EV/EBITDA-allcapex 2013 according to a quick calculation using google finance's statements. Adding in the entire $215mil debt still gives EV/EBITDA-allcapex of 3, still quite cheap.

[writser]

Frankly I have no clue why someone would think 7x EV/FCF is the cheapest stock out there. So many exceptions posted already and several of them have been discussed on this forum in great detail. It would be nice if the topicstarter chimes in again. What am I overlooking? Are you looking for US stocks only? Am I missing some other considerations?

[Zorrofan]

ITT Tech (ESI) is currently the cheapest I know of. But you have to go by the 2013 FS which are in the process of being restated to consolidate the PEAKS program, a pretty sizeable beast. $215 million senior debt, but the PEAKS trust has an unknown amount of assets (student loans receivable) intended to be used to service this debt. The company estimates that a sizable amount of receivables intended to be applied against the debt is impaired.

 

Anyway, excluding the PEAKS program, ESI trades at 1x EV/EBITDA-allcapex 2013 according to a quick calculation using google finance's statements. Adding in the entire $215mil debt still gives EV/EBITDA-allcapex of 3, still quite cheap.

 

Patmo,

 

I notice you have TESB listed as TESB.EN rather than TESB.BR so I was wondering if that is just an different exchange?

 

thanks

Zorro

[Patmo]

ITT Tech (ESI) is currently the cheapest I know of. But you have to go by the 2013 FS which are in the process of being restated to consolidate the PEAKS program, a pretty sizeable beast. $215 million senior debt, but the PEAKS trust has an unknown amount of assets (student loans receivable) intended to be used to service this debt. The company estimates that a sizable amount of receivables intended to be applied against the debt is impaired.

 

Anyway, excluding the PEAKS program, ESI trades at 1x EV/EBITDA-allcapex 2013 according to a quick calculation using google finance's statements. Adding in the entire $215mil debt still gives EV/EBITDA-allcapex of 3, still quite cheap.

 

Patmo,

 

I notice you have TESB listed as TESB.EN rather than TESB.BR so I was wondering if that is just an different exchange?

 

thanks

Zorro

 

No, just my mistake.

[yadayada]

If I would say that there is a decent chance all student loan funding would be cut off because their stats look pretty bad, and that would mean equity holders would be wiped out, what would be your quick response (for ITT)?

[DTEJD1997]

If I would say that there is a decent chance all student loan funding would be cut off because their stats look pretty bad, and that would mean equity holders would be wiped out, what would be your quick response (for ITT)?

 

I have to agree with this...

 

The "for profit" sector has been getting away with stuff for WAY too long.  They aren't doing anybody any favors.  The results for a HUGE percentage of their students is life ruining/altering debt with little to no chance of job prospects.

 

If these "skools" are so good, why does the government have to step in and loan the money?  Why doesn't the skool just loan it's own money? 

 

They have a great product, great outcomes for their students, and rosy future prospects!  RIGHT?

[Patmo]

No quick response, just hold. Tbh I read even on here everyone talking down gold at end of last year and it just flew over my head. I feel like I had a better perspective on gold than I have on FPE, but margin of safety is way too huge to listen to doomsday talk. However it turns out I know I will have had expected value from this investment skewed way in my favor.

[DTEJD1997]

No quick response, just hold. Tbh I read even on here everyone talking down gold at end of last year and it just flew over my head. I feel like I had a better perspective on gold than I have on FPE, but margin of safety is way too huge to listen to doomsday talk. However it turns out I know I will have had expected value from this investment skewed way in my favor.

Patmo:

 

Not to pick on you, but how do you figure there is a margin of safety in ESI & FPE?

 

They essentially have one customer, the federal government.  If they cut of student loans, OR make substantially more onerous to disburse the money, the business model is finished.  You also have the chance of criminality.  The first example of criminal problems is at COCO.

 

So, if there is a "doomsday" scenario, the companies are kaput, and management is off to jail.

 

In a "very bad" to "bad" scenario, it is likely the business is done OR drastically changed & smaller than it currently is.

 

In any scenario, I see a LOT of change coming to the industry.  Education (both "for profit" & non-profit) is at a crisis point and will be changing going forward.

 

Don't be lulled into a false sense of security by trailing financial numbers.  Going forward, those numbers are going to change drastically.  The change won't be for the better I suspect...

[JAllen]

Frankly I have no clue why someone would think 7x EV/FCF is the cheapest stock out there. So many exceptions posted already and several of them have been discussed on this forum in great detail. It would be nice if the topicstarter chimes in again. What am I overlooking? Are you looking for US stocks only? Am I missing some other considerations?

 

 

I think it's that we only own 6 stocks and the ones posted aren't in my circle, so I'd rather own one at 7X FCF (deducting all capex not just maintenance) than a cyclical stock at 4 or something.  I weight my confidence in the business the highest of anything when considering a stock.

[JAllen]

I should add that the one I'm thinking of has super shareholder friendly management, is buying back a material percentage of the stock (3-5%/year), management ows tons, co. is entirely recession resistant, and has no commodity price risk, like I mentioned above. 

[infinitee00]

If I would say that there is a decent chance all student loan funding would be cut off because their stats look pretty bad, and that would mean equity holders would be wiped out, what would be your quick response (for ITT)?

 

Not going to happen.

 

There's too much of lobbying money, too big a political price to pay , not to mention too many employees ( around 50K) and too many students ( more than 2 million) that would be affected for govt to do anything as serious as cutting off ALL funding.

Reduced govt funding - Yes. Zero govt funding - not a chance.

 

In a reduced govt funding scenario, I think the best of the for-profits are going to survive ( irrespective of how education landscape changes).

 

 

 

 

[Patmo]

If I would say that there is a decent chance all student loan funding would be cut off because their stats look pretty bad, and that would mean equity holders would be wiped out, what would be your quick response (for ITT)?

 

Not going to happen.

 

There's too much of lobbying money, too big a political price to pay , not to mention too many employees ( around 50K) and too many students ( more than 2 million) that would be affected for govt to do anything as serious as cutting off ALL funding.

Reduced govt funding - Yes. Zero govt funding - not a chance.

 

In a reduced govt funding scenario, I think the best of the for-profits are going to survive ( irrespective of how education landscape changes).

 

If we forget about market valuations and just go purely by quality, who do you think is/are the the top dogs?

[Patmo]

Frankly I have no clue why someone would think 7x EV/FCF is the cheapest stock out there. So many exceptions posted already and several of them have been discussed on this forum in great detail. It would be nice if the topicstarter chimes in again. What am I overlooking? Are you looking for US stocks only? Am I missing some other considerations?

 

 

I think it's that we only own 6 stocks and the ones posted aren't in my circle, so I'd rather own one at 7X FCF (deducting all capex not just maintenance) than a cyclical stock at 4 or something.  I weight my confidence in the business the highest of anything when considering a stock.

 

Oops you were asking for stable companies only, I guess we just derailed your thread a bit with ESI and for profit education talk.

[infinitee00]

 

If we forget about market valuations and just go purely by quality, who do you think is/are the the top dogs?

 

If we go by for-profit companies that have a very good chance of thriving under reduced funding scenario..I would think Strayer and Apollo would be my choices, although some would disagree with me here.

[vox]

Using free cash flow means interest expense is not deducted, so running this screen would get you a lot of banks and insurance companies. Assuming that you're looking for companies with positive free cash flow, here are some other hats I would throw in the ring: Tivo, Take Two Interactive Software, ITT Educational Services, Hhgregg, Chico's FAS, and RPX Corporation.