This is going to be a place where you can put some of your ideas, valuations and analysis. I do not care if you are a complete novice or run a hedge fund. I want this to be a page for discussion on how we can improve all of our thinking and analysis. If you are new to valuation and analysis of companies and do not feel confident in what you are writing yet, feel free to remain anonymous.
This page is going to be a page of improvement and learning so feel free to ask any questions you might have about any investing topic. Also you should feel free to give your feedback on others ideas. Readers should also feel free to question, challenge,and critique other peoples ideas. Critique needs to be constructive, and as positive as possible.
I will also post some of the best ideas and analysis on the main feed of the blog. If I have your permission I will even post some of the best on my Twitter and Facebook feeds to get you some recognition.
If over the next week several people post their analysis, valuations, ideas, and/or critiques I will randomly select one and send you a free book from my collection.
Let the ideas start flowing.
I’ll go first…
I would submit that Ark Restaurants (ARKR) is an interesting situation. I would further posit that it is undervalued and a compelling investment.
ARKR owns restaurants and food service operations primarily in Las Vegas, NYC, Washington DC, and FL.
Although the stock is up, the current price is not reflecting the worth of it’s operations and it’s future potential. The primary proof of this is that the EV/EBIDTA ratio is 3.3. The company has substantial cash holdings. It has very little debt. The debt that it DOES have was taken out to buy back shares at advantageous prices and carries an interest rate of about 1%. Single digit P/E ratio.
Further, the company pays a substantial dividend of $1/share. This is for a $16.75 stock, resulting in a yield of 6%. There is a high likelihood that the dividend will be higher in the near future…
The company is making money. They are earning about $1.70/share, a P/E ratio of just under 10. ROE is close to 20%. That is with the company holding close to $3/share in cash!
There is reason to believe that ROE on future projects will be MUCH higher than this even…
Management has recently given guidance that they anticipate the results of 2013 being better than 2012.
The company has substantial operations in Las Vegas. If that market picks up, net earnings will be substantially higher.
ARKR has earned over $3/share in the past, and has traded for over $30/share.
If the situation for the company improves, there is a good chance it can return to these prior levels.
It is hard to imagine that the stock will go down much, given support from the dividend.
Thus, you get a high likelihood of gain, and minimal likelihood of loss.
What happened to its gross and operating margin in recent years? It looks like its op margins has dropped from around 8% in 2008 during the recession and has only been in the 1-3% range since that time, dropping even further in 2011. Is traffic still down that much since the recession? I would have thought traffic would have picked up more since then. Or is there something else that has led to margin contraction?
Other than those two questions, with my very preliminary look and what you said above the company looks promising.
What do you think its intrinsic value is?
Why is it so cheap? Any catalyst to drive value realization?
Mr. Market does not know or care about ARKR. It is a micro-cap off the radar scope of most investors. Certainly institutions pay it no mind…This is also a very quite, very boring stock. Nobody (present company excluded) would be talking about it at a cocktail party…
It has gone up a good amount since I’ve gotten in, but there is no IMMEDIATE catalyst to drive value…well maybe a dividend increase in 2013 might bring some interest to it.
They also have a good chance to increase sales and earnings in 2013. P/E is currently 10. I think ARKR has the potential to easily earn over $3/share at the peak of the economic cycle…
With some growth, and some good luck, and a couple years of retained earnings, they might be able to earn something closer to $4/share.
Their operations are heavily tied into Las Vegas. Vegas has been DOWN for several years now. If it were to pick up, ARKR would be earning quite a bit more.
They’ve got a few projects in the works, that will drive growth in the low to mid single digits perhaps.
They pay a 6% dividend, so you are paid to be patient. They have substantial cash holdings. They are making money and are well run. With all of these factors, I am patient to see other people and the market recognize it’s value.
Want to tray Domtar, Jason? Ticker is UFS
Thanks Red I will take a look after I finish up research on a few other companies.