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Seems like one for further due diligence.

Net cash is significant. Assuming roughly $140 million in net cash that's roughly $7 per share on a $15.25 stock.

Reason for further inspection:

EV/IC with cash is .53X. That's too cheap

EV/IC w/out excess cash is 1.69X. That's more reasonable and makes more sense from a capital perspective but still on the low side if the ROIC calculation below is anywhere near accurate. ROIC/WACC as a no-growth valuation benchmark would be 1.9X if assumed WACC of 10%.

EBIT/EV TTM was 13.2%. So your pre-tax owner's earnings yield is attractive. Put this against whatever hurdle rate you want. Consider 6% as a benchmark for instance.

ROIC based on IC w/out excess cash is ~19%.

So cheap stock with profitable business and excess cash.

Quick perusal of 10-K doesn't give any iffy feelings like so many small caps can -- so that's another positive. In other words on the surface at least it looks straightforward enough. I mean 'err boring!




chessburger
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Some notes:

In the industry -- VIAS was acquired by TTMI for 1.1X invested capital in 2015 (announced 2014). VIAS was heavily loaded with debt. (I think $17 buy out when deal was announced stock was below $11.)

PKE long-term multiple is ~1.04X invested capital and currently trading at .59X

PKE at long-term multiple would reflect a $23 share price -- 44% higher.

PKE during time of TTMI and VIAS announcement -- PKE spike to $29. Gives you and idea of a takeout value (at least based on fundamentals at that time.)

No real visibility on business trends -- will probably be safe to assume no growth to modest decline based on recent trends. Business is printed circuit materials to industrial and aerospace based firms.

PKE has recently been paying special dividends on an annual basis. The challenge right now is that unfortunately the bulk of the cash is in foreign subsidiaries and will have to be repatriated.

Lastly -- EBIT/EV (no real special calculation on EBIT -- i.e. adjust for maintenance capex, which probably would push EBIT higher) is over 11%. If your bogey was 6% return and this is earning 11% on the firm -- that seems to be attractive. Especially when ROIC is significantly above cost of capital. In this situation I don't think there has to be a catalyst -- just own the stock and the risk-to-reward should be in your favor to generate reasonable returns.

I would think @ $16 it is worth tracking how it does from here. I don't own a position but am thinking more.


chessburger
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With broad market run -- closing in on $20. Revenue continues to fall (somewhat expected per past company releases -- iirc).

Still looks like a .74 EV/IC multiple with $7ish in net cash after deducting operating cash at 20% of revenue (i.e. ~$25 million).


chessburger
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