1. Regarding the quotes under “Cost Cutting”, billable headcounts only affect revenue – it is not an expense. Billable headcount is the yardstick for measuring a staffing company, and you want it to go higher (higher revenue) not lower (lower revenue). Therefore, the company would most likely report a lower revenue in the 1st quarter of 2010 due to the project end.

2. I am not too familiar with spin-off situations, but it is interesting to note that MHH ($15 MM market cap.) is spinned off from IGate, a nearly $600 MM market cap. company. Both companies now are owned by the two majority shareholders (each owning about 27% of both companies). These two shareholders had not touched their stake in MHH since the spin-off. Knowing their intentions behind the spin-off and what they plan to do with MHH would offer a much greater margin of safety. Otherwise, it is very hard to predict the future earning power of MHH, i.e. the future competitiveness of the company. Its tiny market cap. certainly does not help the attractiveness of the stock.

I’d also want any color on whether Wachovia (now part of Wells Fargo)is no longer a client or if they just dropped below the required 10% reporting threshold.

2. MHH doesn’t have 5 years of data, so the graph gets skewed on one side for some reason..

3. Such a simple exercise but provides a huge amount of detail.

@ Ozz,
For the graham I used a growth of 10%. Very conservative if the economy improves.

@ Mike,
Previously, I valued MHH based on what the company would be worth if the recession was likely over.

In my current valuation, I valued MHH based on its current situation. A company value will always change and it has to be adjusted to fit the situation. If the company shows improvement next quarter, the intrinsic value could go up which is why small caps require more work, but I just don’t want to assume an optimistic scenario.

NCAV is actually $3.03 (11m/3.63m).

@ Mariusz,
I would like to know what the CEO thinks of his company and what their strategy is.
And what he considers the value of the business to be worth and how he calculates it. e.g. Buffett looks at the increase in BV.

Great post. I was wondering, though…What changed from the 3rd Q 10-Q to the 10K that made you re-forecast to the lower end of the $7 – $9 range.

Also, when I look at (CA – TL)/(shrs), I get $11MM/7.06 or $2.96 NCAV. Am I not including something that you are (given that you came up with $2.86)?

Thanks,
Mike

Did you assume growth for the Graham valuation? Using $0.38 EPS and 0% growth, I can’t get the intrinsic value at $6.35. Perhaps I’m missing something.

thx

1. I have found recent success in value investments with a catalyst. This seems like a great investment thesis (after reading all of your MHH posts and verifying the numbers on my own) however seeing as I am new to investing (~1yr), I just would like to know what are the possible catalysts for the market to realize value. Is it insider buying? Is it share buybacks? Takeover candidate? Or is it plain old fashioned time?

2. The price vs. intrinsic value graph seems to be messed up on the scribd doc.

3. The tax effect on earnings post and this example are great, something I did not consider before and another tool to uncover value, love it.