2009 Best Small Companies Part 5

November 30th, 2009 | Comments (9)

This is a continuation of the series of valuing each of the 200 Forbes Best Small Companies.

You can find the list of stocks and the corresponding intrinsic values as calculated by me with the stock value calculator.

2009 Forbes 200 Best Small Companies Part 1 | Part 2 | Part 3 | Part 4 | Part 5

In this list, I’ll list up the valuation results of companies 71-90.

Lufkin Industries (LUFK)

lufkin-equipmentLufkin sells equipment related to oil field and power transmission such as rod lift equipment used to extract crude oil and other fluids from wells and high-low speed gearboxes for industrial applications.

Company is very profitable both top and bottom line of the financial statements. Owner earnings has seen massive growth at more than 50% over the past 5 years. CROIC however, is good, but not as good as it should be considering how owner earnings is so high.

Other fundamental numbers are great as well. Margins are excellent and the slowdown didn’t seem to affect the business.

The one thing that caught my eye was the huge increase in intangibles up 400% from the previous year. Lufkin may have bought companies at a cheap price during the recession but whether they can combine all those companies together properly is something to be analyzed more thoroughly.

lufk-chart

K-Tron International Inc (KTII)

ktron_prductsRegular readers are probably sick of me mentioning what a great company K-Tron is. You can read all the details in the KTII stock analysis.

I sold KTII earlier this month but I made a mistake by not re-evaluating the stock analysis and my position based on the latest quarterly and annual data. Previously I had calculated the value of the stock to be worth $110 but after running through the numbers again, seems like the intrinsic value has increased to around $125.

Cash flow, FCF, owner earnings is always constantly increasing and with a large part of revenues coming from international regions, revenue is well diversified as well as their products lines. The company is probably top few in all the niches it operates in and management is top notch.

They don’t offer guidance or even hold any conference calls which indicates that management isn’t trying to please anyone on Wall Street.

I’ll be providing some more reasoning on KTII in the next November performance update in the next couple of days.

ktii-chart

Houston Wire & Cable (HWCC)

hwcDistributor of specialty wire and cable, and related services to the United States electrical distribution market.

First of all, without jumping into the details, HWCC looks to be real cheap from a stock valuation standpoint. But for some reason a red flag for me at the moment is that the financial statements does not state how much the company has in cash. The beginning and end of period cash value is defined as a dash..

Definitely something to look into.

hwcc-chart

Ansys Inc (ANSS)

54ansysAnsys develops engineering simulation software.

The company has seen explosion of free cash flow growth and the CROIC is phenomenal at 42.1%. In other words, for every $1 dollar invested, management is able to generate a return of 42c. Not to mention how every $1 of sales is converted to 28c of FCF.

But again, while ANSS exhibits some outstanding numbers, intangibles has gone up more than 100% from the previous year and about 300% from 2005. In the event ANSS has to write down these intangibles, it could offer a nice entry point.

anss-chart

List of the Best Small Companies

View all of the first 90 companies.

Disclosure

No positions in any stocks mentioned at time of writing.

About Jae Jun


Jae Jun is the founder of Old School Value. He is on a mission to provide practical and actionable value investing tools, tutorials and educational material to help empower the individual investor. Keep in touch with Jae via any of the methods linked below.

Get Tips and Strategies to Achieve Higher Returns
Bonus: Get 9 FREE Investing Spreadsheet Calculators
  • serinvest

    Jae, pretty nice stuff. It saved me lot of time. What is the simplest way to get intrinsic value (ballpark figure) of a company?

  • http://www.oldschoolvalue.com Jae Jun

    If you mean by using the spreadsheet, determine what discount rate should be used and the growth rate, check the price vs value graph to make sure the intrinsic value lines are not too separated from the historical price.

x
Receive Email Tips and Strategies on Achieving Higher Stock Returns

Bonus: FREE Set of 9 Investing Spreadsheets