Wolf of Wall Street Review Atlas Engineered Products $AEP.V (4.5 / 5)
April 21, 2023|2022 Annual
Awarded my first four star review of Atlas back in early June of 2022, and subsequently upgraded it to 4.5 stars on their Q2 earnings. Anyone who acted upon those reviews would have about doubled their money from the 55 cents where it was to the $1.05 it currently sits at peaking at $1.12 back in late March. It was also one of my Wolfolio selections and one of the TSA discords top 2023 stocks. It is up 40% YTD. Let's check in on how their year ended.
Balance Sheet:
Very strong current ratio of 3.9 which consists of over $16.1M in cash, $5.8M in receivables and $4.6M worth of inventory against only $6.86M of liabilities due over the next twelve months. They have $11.7M in long term debt via multiple loans and mortgages with tier one lenders and owe $2.2M to the tax man.
Cash Flow:
$11.3M of positive operational cash flow generated in 2022, well over $900k per month, and improving steadily as the year went on including $1.5M per month in Q4 alone. They purchased $3.6M in property along with utilizing $5.94M in their acquisition of Hi-Tec, incurred net debt of $6.5M, bought back $1.7M worth of stock and received $1.7M via options and warrants that were exercised during 2022. Overall they increased their cash position by 80% during the year. Interestingly enough, they would have increased their cash position without incurring more debt in 2022 which makes me think they have other acquisitions they are considering in the pipeline. Either way, they are in a phenomenal position through their balance sheet and cash flow statements.
Share Capital:
- Small float with 57.8M shares outstanding with no dilution occurring during 2022. Warrants and options exercised offset by 2.9M in buybacks
- 3M options outstanding, all of which are ITM
- 18% insider ownership (per Yahoo Finance)
- 10M warrants were forfeited at .60 in 2022. Wow.
- No recent open market buying by insiders but the COO left some cash on the table after dumping about 100k shares at .70 back in December. I guess she doesn't read my reviews.
- The buybacks have continued at a good pace post financials
Income Statement:
$61.9M in revenue for the year, 12.5% growth from the $55M achieved a year ago. For Q4 alone revenue was $15M, up 7.9% from last year which is an improvement over Q3 which basically came in flat to Q3 of 2021. Nice annual performance on gross profit as well gaining over 250 basis points to 32% GP compared to 29.4% in 2021.
(note to mgmt - give a guy a total operating expenses line please!
If I were to be anal (and I am), I'd note that total operating expenses grew by 17%, a rate about 400 basis points more than what they achieved in revenue growth, so they were unable to convert anything there, and slightly concerned that this increased by almost 30% in Q4 alone, as without knowing what next quarter will look like, one quarter is a trend without other insight.
Total income before tax was just over $12M, $2.7M better than 2021.
Overall:
Truly outstanding results once again. Biggest question for me right now is how they move forward with their current cash position. They will continue it appears to buy back shares and as I mentioned earlier, by taking on some debt when their balance sheet didn't require it, you'd have to think there are always some irons in the fire on the acquisition front. From a valuation view, they are certainly a lot more reasonably priced than my initial review, but it's still trading at under 1x market cap to revenue while producing an average of about $1M a month in operational cash flow. There's still some room to the north IMO. 4.5 stars again.