RE:RE:Donville on BNNscarface9 wrote: Had this is a Top Pick in May at $0.50. It is up a little, but through a really crappy market. Probably has been a pretty good relative outperformer. Trading at 3 or 4 times cash earnings, so it is really cheap. There are rumours that it is going to get taken out. If the valuation doesn’t get higher, it will get taken out either by management or some private equity guys. Really inexpensive and he suspects that within the next 6-12 months something will happen.
It's possible but for me I don't think it's something to price in at this point in time.. Market is only assigning it a 3.5x p/ebitda TTM, which would equate to at least .75 today.. Seems to me there is a little residual risk from Q1, despite the great beat in Q2. Although their business is diversified, along with cash flows, it's heavily correlated to the global market via their clientel, and, certain industries (storage) can clearly have a significant impact to the bottom line if they take a quarter off. I think that the market is currently transitioning from trailing to forward so that's why we are seeing price knock on the triple top. However, we'll need Q3 "average" results, a couple/few more quarters without downside surprise, and a continued increase in operating margins to prove the synergy is improving efficiency, which will allow them a buffer to accept more financial risk, in order to propel the multiple to higher levels, say, 5-7, 1-2 years out from now. If we are still at 3.5-4x TTM or FTM in 6 months to 1 year, and op margins have grown to let's say 15%, then perhaps there's a suitor out there.. Cheap businesses are good, but good business that are also cheap is even better.. this one's still proving it imo.