I have taken this time to review the successful companies that I have invested in and the ownership of shares by insiders is a non factor. As a matter of fact, when the insiders and the EPS are aligned through stock options, the overwhelming majority out performed the overall market. CPI has an incredibly good reputation for turning out a quality product and this bodes well in obtaining additional contracts. Yes, management must continue to perform and yes the sales people and senior management must execute. So far it looks like they are, which will be backed up when new orders are announced. I have no inside information, just some nice comments from some current customers.
Really? It doesn't bother you that you may own more shares of a company's stock that its CEO does? And I'm not picking on you. It's a philosophical question. I personally think board members should get themselves invested when they join as a sign that that they're not there to collect a paycheck, but actually believe in the company, and that they can make a difference. I, like you, I have no problem with stock options when used correctly. The incentive is that if the price doesn't go up, you basically get nothing.
But shouldn't the officers own a piece of the company? Shouldn't they be more tied into the stock price success than you and I? The former CEO owned something north of 150,000 shares. Shouldn't the current one own more than 7,000? And to your point, if he truly believed in the company's potential success, and was willing to put his money where his mouth is, couldn't he institute a stock buying plan that completely eliminates the Sarbanes Oxley complications?
To your 80% ownership point, don't confuse insiders and institutions. The only insider in that group is the chairman, who dumped shares in 2012. The institutions all bought in along the way. I wonder if we were able to ask them, what they would think about management ownership. While I don't knock your philosophy on it, I think you're probably in the minority when it comes to that position. But that's what makes the world go round!
One last question. "Certainly undervalued." Is it your opinion that this company, turning out non-proprietary (to them anyway) parts for planes, and hasn't grown (and basically won't again for '15) its bottom line deserves a 15 to 20 multiple? If so, could you tell me why you think that?
Thanks for your insights.
Curious Investor, For better or worse, I disagree with officers and/or directors purchasing shares on the open market. With Sarbannes Okley and regulation FD, there are extreme regulations on insiders when they buy and sell shares. Additionally they are compensated with stock options as an incentive package. If the stock does not appreciate above the issue price of the option, the officer/director does not receive compensation for those shares. They are certainly incentivized to make the stock only go up. In addition, almost 80% of CPI float is owned by Insiders and Institutions. The quality of the work by CPI has certainly been exceptional and they seem to have a good, if not great reputation for putting out finished product. At .80 to 1.00 in profits, CPI is certainly undervalued. If the company continues its diversification of customers (ie: Embraer) this company should show nothing but growth and larger EPS.
My REAL concerns are two-fold. The first is the one Boolean has harped on, and that is, no management or board stock buying. The longer this goes, the worse it feels. How can a CEO not own a share of stock that he purchased himself? He needs to buy 10,000 shares or more to show us his own confidence. Otherwise, why should we believe there's something to be confident in? How about the board? I've scoured the Form 4s and I've NEVER found a purchase by ANY member of the board, other than the exercise of options? Unheard of for a company that wants us to believe its story. Why should we, if you seemingly don't?
The second concern is that they still haven't filled the management gap left when the previous CEO left. It doesn't look right at all that what is supposed to be a $100 million company has a person with the titles of CEO, COO and President. That would be ok if it was interim, but 10 months in isn't interim anymore. It strikes me as penny-pinching, which also isn't a good sign if we're to believe there are good things coming.
I'm pretty leery about investing here, but like I said, at the right price, history says this is a good buy even with all my hesitation. I'd welcome thoughts from others. Am I being too concerned about these things? Do others agree that there are some bad signs here? And if so, which bathers you the most? Is this company ripe for acquisition, and we could get a premium just based on that? Does anyone know if there are any rumblings about that in the industry?
I look forward to some good dialogue.
What should we expect? Here's my take on it, complied from my own views, but also from what others have said on this board. I'd appreciate some feedback, as I will always listen to intelligent points of view.
I'm not pleased that the institutional market has not supported the new CEO. Meaning, the stock is down almost $4 from when the management change occurred, and there hasn't been a showing of support for the new CEO, by bringing the price back. Is it a lack of confidence, or a wait and see more attitude?
As far as that goes, I think it does lend itself to other opinions expressed here that even the two late year news items, the E-2 and the F-16, didn't excite the big investors. While the stock had immediate jumps when announced, it has settled back down again. Is that because as has been stated here, the E-2 really wasn't anything new, and the F-16 is IDIQ, so it may be worth only pennies on a dollar of its potential value?
Given their guidance, and the items just mentioned, I'm thinking this should be a $9.00 stock until, or unless, something truly exciting happens. $7 - $8 million in net income yields that kind of valuation in my opinion. I will say that down at that level, or in the $8.00 range, which could happen, I would buy back in very quickly. Because whether this stock deserves its pricing at times, historical charts show that it always bounces back from that point and so there is money to be made. It may not be for a rational reason, but that really doesn't matter.
I guess barcytom went away for the holidays. And while I'm not bullish on the company right now, I do agree that people deciding management itself isn't any good is an arbitrary assessment in most cases. You are correct in that if you're not a management or industry expert, can you judge whether a manager is doing a good job with the company? If you've never run a company, can you truly judge the performance of another?
Yes, we can have our opinions, thoughts, feelings and the like. But do we know what it's like to be in the trenches? Do we know what is happening behind the scenes of any company? Is the difference between what barcy calls good or bad management the award of a single major contract? It could be, with his criteria. That's why even when I don't think a company is necessarily good, I try not to blame the management, as we don't know what the board has directed, nor what is going on that we don't get to see.
CPI Aerostructures announced that it has received a notice from the Defense Logistics Agency to resume work on its previously announced contract (CVU) : The term of the contract is for a period of 5 years, with a single option for an additional 3-year period, and has an estimated value, including options, of approximately $53.5 million.
You and your cronnie have criticized management using various terms, but you never state any qualification or lack thereof, to support your claim. Are you a management expert? Are you an industry expert? What qualifies you to determine if a management team is superior or inferior? Do you have some personal involvement with the company?
Thankfully I dumped this asset destroyer well over a year ago. But not to be too embarrassing to them let's just look at the facts.
Since Jan 2014 S&P +14%
CPI (CVU) since Jan 2014 -28%.......
Management inept and under qualified. Even future compensation cuts in their salary will not get them to leave. Why? Where else, as in what company would hire them for compensation they are not worthy of whatsoever which they collect now. Why quit if they had to find jobs it would be at their skill level in a normal growing company which would be about a 1/3rd of what they are being paid now. What metrics does the Board of Directors measure their performance against. Certainly not enhancing the value of the company for their owners (aka the shareholders). Not a growth story, not a stock that even yields a dividend. Just a black hole of shareholder funds in the greatest bull market ever. All they ever, yes ever be able to do is make enough money to reward themselves and keep the lights on. The owner never benefit.
Does the Board of Directors provide any oversight and measurable goals for the shareholders?
As has been raised here before, what stake does some Board members even have?
What about the CEO? He has not invested one penny in the company. This is unheard of and that should speak volumes in itself. If the CEO and Board members will not risk their ow money why should you?
But then again what do I know other than the stock is trading well below it's share price 2 1/2 years ago when management did dump their free shares @ $12 down from $16 while the market has essentially doubled and you get paid quarterly to own other stocks.
The choice is obvious, avoid this stock like the plague and revisit it only when they bring in proven leadership,and then only if there is anything left of this joke of a company.
Sentiment: Strong Sell
Remember - a lot of what was achieved in the past was due to THE GUBERMENT giving them the gravy - when those contracts were flowing it was an easy gig but when that started to dry up management had no answers and was why I hammered them on broadening out their focus. They have always been pretty anti-shareholder so it would be a huge sign if they would step up and BUY ON THE OPEN MARKET and not just take options for under achievement. Management is suspect and I will leave it at that. If they do get some broader contracts in the next month the stock will react just as it may drop if they lose the small business issue being addressed now. Good luck and you have the channel right on as far as the movement of the stock with 16 the very upper level and only for a short time. Boolean
Thank you, Boolean. Both posts contained well thought out answers. And as a former holder, I do agree that there is a time when I would jump back in, simply because the stock itself has a proven track record of falling into the $8.00's only to run back up to $12, $14, $16. I just didn't see what the hyping was for at this point in time, and couldn't get anyone on this board to engage in an intelligent conversation about it. I appreciate that you did.
And I agree 100% with you about management and the board buying shares. While I have no issue with options being used as compensation for the board, and management being given shares as part of their bonus packages, it concerns me that a new CEO wouldn't have purchased 10,000 shares to show the investment community that he believes in his own ability to grow and manage the company. If you look at the Form 4's, you'll see that if anyone reading these posts owns more than 7,100 shares, they have more skin in the game than the CEO! How is anyone comfortable with that? And lastly, they've added two new board members in the last couple of years, and neither one of them has purchased even one share. There's just no commitment from anyone in leadership.
This is a nice little company that has accomplished some amazing things in the past, but I don't see where we can be confident that it will continue. At least not yet.
if some of these bigger contracts come thru guidance will accelerate forward but there are also costs that will increase so what comes to the bottom line is still the unknown. again - if management was strong then you would not be so concerned but them being a weak link you have to be concerned and temper your enthusiasm. IF they would just come out and BUY SHARES ON THE OPEN MARKET when they have a chance instead of constantly SELLING THE GRAVY investors would feel a lot better. Management won't do it though as they appear to have no confidence in their ability to manage this company so the free money is the one they TAKE from shareholders. Boolean
NOT SAYING BULLISH YET -- looking at 2015. The stock may well fall more here especially with the SBA decision pending and the 53 million award overhanging them. No - management is a very very weak link here and that makes it tough to buy. That they are moving more into commercial as I have screamed at them to do is positive albeit late. That they refuse to buy shares on the open market shows their contempt for shareholders and a lack of belief in their own rhetoric. They take the gravy money in options and then sell them when they can - total top 1% belief system. Now my key indicators though are moving very positive and they may move into full bullish in the coming weeks. We shall see. Again commercial growth should spur increased revenues but I need to see management show they have the skill set to get it done.
They need to sell the company but they won't until they secure their gravy or can make deal that does that. Remember the CFO was an M&A guy in the past and this is company that clearly needs to be SOLD. The market has been on fire and all this management can do is take that fire and burn down the stock price. Without the freebies from the guberment they are lost BUT showing some movement into commercial.....commercial should show strong numbers so if they can start to get some of that gravy then we will be fine. What I want is for SOME BIG MONEY TO COME IN AND PUSH MANAGEMENT TO MANAGE or to be removed. I send out requests for that but to date no takers.......it is a small company.
So bottom line I would wait to see if it drops thru year end - maybe the insiders had some word on the SBA decision and had family sell at the end of the day as it took a hit then. Who knows. I may do some more DD later and get back to you but I right here and now there really is no reason to jump in.........YET. Boolean
Boolean, I am asking you not to give me a smart #$%$ answer, but to truly make me understand why you feel this way. I'm getting all kinds of cr*p about my postings, but the reality is, I'm trying to see if there is truly a reason to invest again.
Your positive recommendation shocks me, but still, I'd like to know why you're making it. I will be honest and tell you that sometimes I think your rantings are just nuts, yet I would still like to know why you are bullish right now for 2015? My current sentiments are exactly the opposite.
Besides completely agreeing with you regarding management and the board's unwillingness to show us they believe their own hype by buying thousand of shares each, I also have a different concern. During their investor day, they were very clear that even though revenues will increase in 2015, the increase will be at zero gross margin because the increase is related to A-10 work. And as a result, THEY STATED that 2015 net income will be between $7 and $8 million. That is their projection, not mine. In round numbers, that means the 2015 eps will be between $0.82 and $0.94. Do you agree? And if so, what 's the excitement about? Why give the company a 15 multiple? At a 10 multiple that means the stock price should be between $8.20 and $9.40. So why be bullish?
And once again, I'm not trying to be negative. I'm asking someone, anyone, to tell me what I'm missing! Am I reading this wrong? Is there some major news or event or factor that I'm completely ignoring? I understand that if the stock gets into the $8's again, it's a buy. It always is. One just has to look at the charts to see that if you buy in the $8's you will make money at some point. But at $11.00? $12.00?
but I am going bullish on it now. 2015 should drive it higher even though management won't buy on the open market like most intelligent and shareholder centric managers do. They are freeloaders we know but even they won't be able to miss gaining in 2015 so I will go bullish on them - maybe they can trend down a bit more to make it a real deal for me. Boolean
I keep asking the same questions because you refuse to answer them. I'm looking for answers, not arguments. My intentions are honorable. Can you say the same?
So you agree with the man who knows more than anyone, keeps asking the same questions from the board and is afraid to talk to the company and you agree with the person who calls him stupid, now that's what I call taking a stand