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LoJack Corporation Message Board

  • murphysunset murphysunset Jan 11, 2013 2:27 AM Flag

    Cash Illusion: EV/EBITDA is 9x

    People who are buying because of the cash position are wrong. The cash is illusory. It is not cash that can ever get paid to shareholders or pay down debt. It is too good to be true. Why would a $150 million company need $40 to $50 million in cash if they could pay it to shareholders (including the board and management). Plus, why would they need $14 million of debt that is costing them 3.9% plus fees when they are getting just about no interest on their cash. They are throwing away $500,000 in interest, if eliminated, would have a huge effect on earnings. Why would a bank charge this high rate if the CASH / debt is 4x. It this were true, the banks would no risk or the company would pay off the debt and save the interest. The mortgage on my house is cheaper than that. It makes no logical sense. If the cash was actually "extra cash" they would have declared a special dividend before tax rates went up like Costco and many other companies did. If it were there, buyers would be hounding the company. Where are they?

    So what you have is a market cap of $51 million + $14 million of debt = $65 million (TEV) / $7 million of "real" EBITDA is 9.1x. Management is hyping the EBITDA with add-backs. If they didn't pay in stock then they'd pay in cash therefore an add-back makes no sense. This company is a 5x EBITDA. $7 million EBITDA x 5 = $35 TEV - $14 debt = $21 million equity / 18 million shares = $1.16 per share. This is pre-litigation. After settlements, the debt will go up substantially and the $1.16 will seem generous. I think they are batting 100% on losing lawsuits. At 7x, which is way too generous, it is a $2 stock.

    Does anyone think it is strange that a CEO making over $500,000 only buys 10,000 shares at $2 (2 weeks of his comp) and I can't find any other insider buying. Board members are making $120,000 and don't like the stock either it seems. Also, does anyone find it strange the CEO buys his stock days before the announced buyback? Where is the SEC? The ultimate insider trade.

    If it seems too good to be true it probably is. This is not a 9x EBITDA company. This is a $1 stock!

    Sentiment: Strong Sell

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    • Really nice post but extremely misleading and simply incorrect.

      The cash is real. Many many companies carry both a pile of cash and a pile of debt.....PEP, MMM, NUE, STX, TA, MCZ....and on and on. No different than you with the mortgage you mentioned. I sort of bet your savings, checking, and brokerage accounts have positive balances YET you still carry debt at 3%....by your logic that is stupid.

      That said, if you believe the TTM EBITDA is "as good as it gets" then LOJN is not a great buy. If, like me, you believe it could easily double or triple over the next 2 years then maybe it is a good buy.

      So, I am truly curious why a person like you makes the sort of post you make, you obviously don't own the stock since it is such a bad deal. I can't imagine you are short on an illiquid stock with a massive buyback in place and active.

      So, what's your deal....truly curious.

      • 1 Reply to uptabdowntab
      • interesting examples you use. these companies generate as much revenue in a week or a month than lojn does in a year. do you think a steel company has the same working capital needs as a licensing company? Pepsico? The companies you use are borrowing at probably 1 to 2%. check commercial paper rates. ridiculous comparison.

        you may also note that management's "adjusted" ebitda guidance keeps going DOWN not up. this puts your thesis at odds with mgt.

        am i short? no. but it is something to consider if it gets bid up much more.

        if the stock is so cheap where are the extraordinarily well-compensated insiders?

        Sentiment: Strong Sell

 
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