Aligned Management at 7.6x Earnings
Double-Digit Shareholder Yield at 3.5x EV/FCF
Key Metrics:
7.6x earnings
3.5x EV/FCF
No debt
Aligned management
“The heads of many companies are not skilled in capital allocation. Their inadequacy is not surprising.” – Warren Buffett, 1987 Letter to Shareholders
Most CEOs are good operators.
They know their industry, they know their customers, they know how to run the day-to-day. But when it comes to deciding what to do with the cash the business generates, a lot of them lose the plot.
They overpay for acquisitions, chase growth for the sake of growth, and make promises to shareholders they never intend to keep.
The result is that shareholders pay the price.
That’s why it matters when a management team does the opposite.
When they buy back shares at cheap prices, when they grow the dividend, and when they have the discipline to say no to deals that look exciting but rarely work out.
The company I’m writing about today does all of that.
What really caught my attention was something I read in their annual report.
Management wrote that they would not follow what they called “the myriad mistakes of the sector where many acquisitions have failed to deliver promised synergy or value-add, thereby inflicting at best, large scale devaluation of shareholder funds and at worst, total destruction of shareholder value.”
I’ve read a lot of annual reports. I don’t remember reading something like that before.
And then there’s the valuation. The stock trades at 7.6x earnings and 3.5x EV/FCF, with zero debt, a 6.2% dividend yield, and buybacks that have reduced the share count by 14% in two years.
Put the dividends and buybacks together and the total shareholder yield is running in the double digits.
Revenue is backed by a long-term order book and recent contract wins.
So in short, you’ve got management that understands shareholder value, a cheap valuation, and a clean balance sheet.
Let’s get into it.