Friday, November 13, 2009

More Takeover Names

Our “takeover” screen turned out two hundred companies that could be good takeover targets. We filtered out all but twelve. Seven of these companies were presented in the last two posts, “Star Quality” and “Minnow Watching.” Some investors might wonder why we started with a screen and did not just follow the rumor mill. Well rumors of takeovers are a good place to go. Yet, what happens when the deal just never gets done? Do we need to go into detail on Microsoft and Yahoo?

We chose companies that could come under the radar of strategic investors, i.e. their peers or competitors who want them for their strategic value, but could offer investment return even if no deal comes along. Consequently we paid attention to positive cash flow and undervaluation on a forward basis.


Pantry, Inc. (PTRY: Nasdaq) - Convenience Store Chain - $14.50
Market Capitalization: $330.0 million
Trailing Sales: $7.1 billion
Trailing Net Income: $68.8 million (1.0% net profit margin)
Cash Conversion Rate: 3.0%
Debt / Equity: 2.86
Cash / Debt: 0.17
Price / Earnings: 4.7 X (Industry: 44.5 X)
Forward Price / Earnings: 9.7 X
Price / Cash Flow: 1.8 X (Industry: 28.2 X)
Price / Sales: 0.1 X (Industry: 1.7 X)
Star Quality: Well established brand and market presence in the southeastern U.S. with 1,650-plus stores in eleven states, provides an instant presence in the region for another larger regional or national player.


Premier Global Services, Inc. (PGI: NYSE) - Communications - $6.20
Market Capitalization: $480.6 million
Trailing Sales: $609.4 million
Trailing Net Income: $23.0 million (3.8% net profit margin)
Cash Conversion Rate: 16.4%
Debt / Equity: 0.96
Cash / Debt: 0.14
Price / Earnings: 20.2 (Industry: 12.2 X)
Forward Price / Earnings: 10.3 X
Price / Cash Flow: 6.7 X (Industry: 13.2 X)
Price / Sales: 0.8 X (Industry: 9.7 X)
Star Quality: Premier just sold its e-mail marketing business to Mansell Group, leaving Premier focused exclusively on the IT customer. The move will help Premier use its sales and marketing resources with greater efficiency. It may also make it a more interesting target for another IT-focused provider.


Startek, Inc. (SRT: NYSE) - Staffing & Outsourcing Services - $6.20
Market Capitalization: $92.3 million
Trailing Sales: $289.9 million
Trailing Net Income: -$3.8 million (-1.3% net profit margin)
Cash Conversion Rate: 1.8%
Debt / Equity: 0.00
Cash / Debt: na
Price / Earnings: neg (Industry: 31.9 X)
Forward Price / Earnings: 10.5 X
Price / Cash Flow: 7.6 X (Industry: 18.7 X)
Price / Sales: 0.3 X (Industry: 2.7 X)
Star Quality: When businesses cut back on employees, they often increase outsourcing - especially if they have to gear back up rapidly to meet increased orders. As the turnaround begins, we expect Startek to be a winner. Well established footprints in the U.S., Canada and Asia make Startek a good tuck-in acquisition to extend market share or customer base for a larger outsourcing player.


Symmetry, Inc. (SMA: NYSE) - Medical Devices - $7.80
Market Capitalization: $281.5 million
Trailing Sales: $414.1 million
Trailing Net Income: $29.7 million (7.2% net profit margin)
Cash Conversion Rate: 12.6%
Debt / Equity: 0.47
Cash / Debt: 0.15
Price / Earnings: 9.3 (Industry: 23.7 X)
Forward Price / Earnings: 9.7 X
Price / Cash Flow: 5.5 X (Industry: 26.6 X)
Price / Sales: 0.7 X (Industry: 3.5 X)
Star Quality: Management cut guidance for the coming quarter as demand for orthopedic devices and other implants has been weak as patients have delayed surgeries. Cost controls have kept the company in the black and operating cash flow remains strong. Valuation metrics are attractive.


TEAM, Inc. (TISI: Nasdaq) - Business Services - $16.20
Market Capitalization: $307.8 million
Trailing Sales: $475.2 million
Trailing Net Income: $19.1 million (4.0% net profit margin)
Cash Conversion Rate: 11.4%
Debt / Equity: 0.47
Cash / Debt: 0.22
Price / Earnings: 16.7 X (Industry: 23.9 X)
Forward Price / Earnings: 13.1 X
Price / Cash Flow: 9.8 X (Industry: 18.1 X)
Price / Sales: 0.7 X (Industry: 60.3 X)
Star Quality: TEAM is well established around the world with its maintenance and construction services for heavy industry. When the oil and gas industry or a waste water handler needs help with leaky valves, it is TEAM that gets the call.


Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

1 comment:

jack said...

Your small cap strategist is great and we have been making some investments in small cap companies..small cap stocks are good for investing,never mind the capitalization of the company,but the net profits made by the company is more important and it is this which decides the fortune of both the company as well as the investor.there are many companies,which help us guide in investing on stocks.