AOI has a higher return on assets and much higher return on equity (the latter might be due just to leverage?).
I didn't follow your comment about UVV being cheaper on an EV / EBITDA multiple. The key part of your claim is the word 'normalized'. That implies you think UVV will show additional EBITDA profitability in a better economy? Why?
Which of AOI or UVV do you think is the more likely buyout candidate?
AOI benefitted from a $14.9M QTD / $5.2M YTD tax benefit 9/30/09. That is almost 1/4 of their QTD net and 9% of YTD net. In comparison, UVV's tax provision is around 32%.
Without looking too much into it, I can only assume it may have related to reversal of deferred tax asset provisions. Its non-cash, but nevertheless included in earnings.
Taxes are usually paid when you make money, hence the use of EBITDA versus any ratios, like ROA or ROE that uses net as a numerator.
Also, EBITDA metrics strips the leverage component when comparing because AOI had interest expense of $87.2 million YTD versus UVV's $20.3 million YTD. So EBITDA gives you clearer look at operations before leverage.
My normalized doesn't assume a better economy, I was trying to see what earnings was annualized assuming adjustments to be made for shipment timing, as UVV noted on their earnings conference call. That's what I meant.
Regarding buyout, I am still looking into this so I can't guess. Any insight on whose operations/sourcing to particular customers would be appreciated.
From an operational standpoint, UVV has a GP margin around 100-120 basis points higher than AOI, so in terms of bottom lines, UVV would be more immediately accretive to the acquirer than AOI. But AOI's cap structure is easier to consume...I don't know... But what I do know is that you don't want to be the last one standing at the dance without a partner.
I agree EBITDA is better for studying pure operations of the business, but even there AOI seems to have a better ratio against enterprise value, just slightly. I guess the difference is from the normalization you are describing.
I agree that buyout is the main upside. Unfortunately I never got in at a price that I think covered the downside. I think these companies will get some earnings surprises to the downside in 2010, so maybe I will still get my shot.