RUBI undervalued once again and I'm buying back some of the shares I sold when we saw $20 earlier this year. This seems to be an over-reaction to the CFO leaving. Frank runs this ship and it appears as though Todd Tappin was looking for some more responsibility in addition to his CFO role. The opportunity he's going to give him that as the President. A 10% discount on top of an already discounted price is a gift that I'm taking advantage of. Q1 results were well above forecast. Q2 results will likely provide a nice beat as well. With the company heading into the seasonally strong Q3 and Q4, I don't expect we'll be trading at these depressed levels for long. RUBI leads the industry in quality, the industry is growing significantly, video is an ever growing opportunity, and they haven't even started monetizing all of the data they collect. Cash continues to build as earnings and cash flow come in ahead of plan. Once again trading at close to 6x 2016 EBITDA of $80 million. Too cheap for its growth...
Sentiment: Strong Buy
RUBI is significantly undervalued in the low $12's. The company will report earnings near the end of the month and I expect them to beat estimates and their own guidance handily. They have a history of under promising and over delivering. EBITDA guidance for the fourth quarter is $20 million, I expect them to come in closer to $25-$26 million of EBITDA, meaning full year EBITDA in the range of $48 - $50 million. Cash should increase to close to $140 - $145 million, meaning at current share prices, the company is valued at 8x trailing EBITDA.
The company has set EBITDA guidance for 2016 at $45 million - $60 million. Keep in mind they initially set 2015 EBITDA guidance at $20 million, and they're coming in at more than double that amount. I would expect the company to raise its 2016 guidance when they release earnings in late February, and then continually throughout the year, similar to 2015. I would estimate 2016 EBITDA of close to $80 million, meaning they are trading at less than 5x 2016 EBITDA! Please find me another company that is growing at 30% - 40% per year trading at 8x trailing EBITDA and 5x forward EBITDA.
Fair value is above $20. The company traded over $20 per share after last year's earnings release, and performance has more than doubled since that time. How this is trading at half the price, with double the performance is puzzling. The upside at $12 is 50% - 100%, while the downside is 10%. This is an easy trade and I'm loaded up with shares and options (March 12.5 and 15 calls). Look at CRTO, in the same space, announced earnings and they are up 20%+. I would expect something similar or greater with RUBI on earnings day.
Sentiment: Strong Buy
Fiscal year-end ER will come in mid-December, just like last year (December 19). The fourth quarter / full year financials take longer as they're audited.
Q3 EBITDA was double the projected amount. Q4 EBITDA is projected at $20-$21 million, and given their history of beating projections, I would expect them to post close to $25 million of EBITDA in Q4, putting full year EBITDA at roughly $48 million. Cash & Investments were abnormaly lower due to the timing of a payable by approximately $20 million, so at current prices, the Enterprise value is roughly $510 million versus $48 million of EBITDA in 2015, or a 10.6x multiple. Given the continued growth expected, with EBITDA in 2016 likely to come in north of $60 million (given their conservative guidance history), the forward EBITDA multiple is closer to 8x, or well below the median multiple of similar companies in the industry. I expect this to trade back up to near $20 by March 2016.
Sentiment: Strong Buy
Q2 wasn't just a great quarter, it was a phenomenal quarter. Keep in mind that the company earns the majority of its revenue in AUD dollars (AUD). During the quarter, the AUD was at its weakest levels in over the past 5 years and averaged $0.78. When AYSI reports its financial, the revenue is shown in US dollars (USD). One could convert the revenue to AUD ($8.974 million USD / 0.78) to see that Q2 was a record quarter in AUD ($11.41 million AUD).
More importantly, EBITDA was a record $3.8 million USD for the quarter, a record quarter in USD or AUD.
In the past year, AYSI has also released a new ceramic product. It would be interesting to know how that product has been accepted by the market and if its been contributing to these record results.
I think the "weakness" in mining is actually a huge benefit to AYSI. AYSI's product are designed to minimize disruptions due to maintenance and allow mines to run more efficiently and profitably. AYSI's key selling points are exactly geared toward these benefits. So long as volumes continue to grow, miners will be extremely focused on driving productivity and profitability gains from their existing operations, especially in this low-cost environment. I expect to continue to see strong performance, especially as prospects in China are starting to improve.
The valuation of the company is absurdly low. They have consistently shown that they can perform in any market. They have been profitable every year except in 2009, when they lost $72,000 (only $72,000!!! in one of the worst recessions and mining environments). It baffles me how this company with its consistent performance can be valued at just 1.8x EBITDA, when its weaker competitors trade at over 5x - 8x EBITDA.
Sentiment: Strong Buy
At what point does AZN or Astellas just buy FGEN? They have some large milestone payments left to pay FGEN. FGEN is eligible for ~20%-25% royalties and over $1.5B in clinical and commercial milestones –- including $762M in upfronts combined. At today's share price, FGEN is valued at only $945 million (Enterprise Value).
Sentiment: Strong Buy
Results hurt by foreign currency... who knew
Good luck to remaining longs, I should have kept a bit of my short position, but the risk/reward wasn't as compelling at $29. May be a good buy around $20...
Still plenty of downside risk. I'm out of my short at this point, but I wouldn't be surprised if this fell even more. As I've said all along, they're going against some rough headwinds with Q4's weak orders, the decline in backlog, and currency. I think a good quarter is in the range of $0.35 EPS. It wouldn't surprise me if the stock dropped even further after reporting $0.35 as fair value as I've been saying all along is in the $20 - $25 range. Upper $30's and low $40's were a gift longs should have taken... Good luck to you.
Great call here as the stock had just overshot to the upside. I hope we were able to convince a few longs to at least sell some of their holdings when the stock was $40. I've trimmed back my short even more as the risk/reward holding into earnings just isn't as great when it's trading at $29 versus $40... Still think fair value is around $20 to $25, but not much upside left to being short here, especially with the drop this has seen over the past week.
I'm down to about 50% of my peak short position after having covered some more this morning around $32.10. I would definitely consider shorting more if this went above $35 before the Q1 earnings. I still think fair value is closer to $20 or $25 than $35 or $40...
Only people buying are those who are closing out their short positions... Closed about 1/3 of my position today at $33 and below. Will look to reload if this moves back abover $35 before earnings...
How in the world do you expect the company to post earnings of $1.80 this year? I'm getting close to $1.35 and that's assuming growth of 5% on sales this year. I'll spell it out for you... $32 million EBITDA less $7.5 million depreciation & amortization, less $6 million interest expense give you earnings before taxes of $18.5 million, using a tax rate of 32% (could actually be closer to 35%-38%), gives you net income of $12.58 million, and EPS of $1.36 using 9.2 million shares out.
A reasonably high P/E multiple for the company given its size, industry, levereage, and organic growth would be in the 15x-18x range, implying a value of $20 to $24... Do the math
This is why you lock in profits when your stock is overvalued by 80% - 100%... Uptrend is broken. Momo players will be rushing for the exits. Q1 results will be bleak. $20's are coming next week...
From the Company's 10-K:
The Company believes there are numerous competitors in the motion control market, many of which are substantially larger and have greater resources. Competition involves primarily product performance and PRICE, although service and warranty are also important. Anytime you're competing on price with numerous larger competitors, it means you don't have much power in terms of pricing. Maybe commodity was the wrong word to use, but I think you get my point.
A dividend raise??? They're currently paying $0.10 a share in dividneds a year, thats a 0.0025% yield at current prices... I dont think anyone owns this because of the dividend... or would buy if they even quadrupled the dividend...
In regards to a share raise, they would have to go at a significant discount, that's why they won't do it (even though doing it at $30 per share would be value accretive), but nonetheless...
I think your logic is flawed. They would under your case issue $40 million of shares, get ~$40 million of cash, pay down debt, and still have $35 million of debt. (I would argue that there would be a significant discount to current price in the case of an equity issuance for valuation reasons discussed below, but I'll humor you) What would they use to fund the acquisition? Issue additional shares? They have no cash, still have debt... I don't think a seller of a business would take shares at this value. They would do the same analysis I'm doing and any logical investor would do. What's the value of the business?
This is a small $30 million EBITDA business that deals with basic motors for industrial purposes. They are not producing a sophisticated product at all, or a product that has proprietary technology. They are a small player in a large industry with much more capable and strong competitors. That's why you see the margins being so low, they don't have any power to command higher margins/prices, its more of a commodity type product.
Small industrial companies like this are typicall valued at 8x - 9x EBITDA at the highest end. $30 million of EBITDA x 9x = $270 million value of the business, less debt of $75 and plus cash of $13 give you an equity value of $208, divided by the number of shares gets you $22.60 per share...
A seller would take the equivalent # of shares that get him the true value of the business, and that would mean significant diluation of value to existing holders at current prices, then throw in execution risk with integration (though I will admit its a bit mitigated given their recent success with Globe).
I have nothing against this business or management, I just think the share price has gotten well ahead of itself.
All this discussion is moot in my opinion as the price will not be at this level once Q1 results are announced. Just look at the headlines from other companies on the effect of the stronger dollar...
There is no way they would be able to issue a million shares at these prices... They would have to price the shares at a pretty significant discount in order to sell a million shares. Secondaries typically go out at discounts to current price and even more below current price when it's for a company this size, with illiquid trading, and at overvalued levels.
Either way, it won't happen until after they post Q1 results, at which point the stock will be back down to more reasonable levels...
Take a look at the recent Q1 headlines from industrial companies with exposure to international markets:
"Strong dollar weighs on United Tech sales"
"GE Q1 Earnings, Sales Decline, On Cheap Crude, Pricey Dollar"
"DuPont Forecasts Larger Foreign Exchange Hit as Sales Slip"
AMOT will be exposed as well with 1/3 of the business overseas. With the Euro being down 20% relative to the dollar year over year in the first quarter, it will prove to be a drag on AMOT's sales. US sales growth would need to be 5%+ organic increase in US sales to just have AMOT post a flat sales quarter, and that's assuming their European business was flat in Q1, which is in doubt given all the weakness in Europe...
What will happen to the stock when its no longer reporting 100%+ revenue increases and instead is posting flat to down revenue???
The trend looks like its reversing here. The market is worried about global growth and slow growth in Q1. GE's industrial segment report a 1% decline in sales in Q1, partly due to the strength of the US dollar. Today's market drop reflects those fears. VIX is still quite low near 15 so fear could escalate and losses could accelerate.
They don't use currency hedges. They sell their goods in Euros, but their costs in those geographies are also in Euros, so no double hit with the decline in the Euro. It's a natural hedge when you have both sales and costs in the local currency.
The major impact is just going to be on the reported results, which are in US dollars. So any profitability in those regions will have to be translated from Euro to Dollars, which due to the currency movements, will be worth 20% less in USD year over year.