A cheap brand with a hidden kicker

There is this 128-year-old brand trading at a really cheap valuation.

At less than 1x EV/EBIT, 0.50x book value, and about 1x EV/normalized free cash flow.

I found it by going through all the OTC stocks one by one.

I do this from time to time.

What stood out to me first was the huge cash position. It’s bigger than the entire market cap, which is why the Enterprise Value is so low.

Now revenue wasn’t exactly growing here.

I wasn’t necessarily a fan of this, but I guess that's part of why it’s this cheap.

The brand and the valuation were still interesting enough to keep reading.

So I dug into the filings.

And I found something that I liked.

Buried in a small side note, not highlighted at all, was a tiny piece of information that wasn’t there last year. Something that could point toward a potential expansion and revenue growth.

Management did not call attention to it at all. In fact the MD&A is about as minimal as it gets. And based on the fact that the share price has not moved, I am fairly confident almost nobody else has noticed it yet.

So here you have a business trading at a very cheap valuation, priced for zero future growth, with a potential kicker on the horizon that could change the whole story.

Let’s take a closer look.