Some Stocks Are Just Cheap

A family business at 7x earnings with hidden assets

Sometimes you find a stock that is just cheap for no reason.

It is run by capable management.

It generates positive cash flow.

It returns cash to shareholders.

And it even owns hidden assets.

All of that at a low valuation.

What more could you ask for?

Today’s stock is exactly that.

It is a family-run business that has been around for decades. It is resilient, boring in a good way, and has been operationally profitable since 2002.

Over the past decade, earnings per share have grown at close to a 20% CAGR.

And yet, the stock still trades at a large discount to peers, at just 7x earnings and 4.6x EV/EBITDA.

After demand surged a few years ago, management invested in a new production facility. That facility is now fully operational, and free cash flow is as strong as ever.

With an already elevated cash position, increasing shareholder returns appear to be the logical next step.

On top of that, the hidden assets provide downside protection and add another layer of margin of safety to an already cheap stock.

So, in typical fashion, let’s walk through the analysis.