[...] in August of 2009, I went through the 3rd quarter results and concluded that the intrinsic value of MHH was between $7-9. I targeted the upper range of $9 [...]

[...] Old School Value presented Value Stock Mastech Holdings (MHH) Update [...]

I like to keep things simple. By simply sticking to the raw asset value I get a value that I am absolutely sure will be valued. This will also be the underlying bottom value of the stock for me – a look at the downside protection.
Then for future valuations, I could adjust values here and there, but unless I’m an expert in the field I’m likely to get it wrong so it’s much better for me to err on the conservative side than optimistic side.

I’ve missed out on plenty of opportunities but at the same time, I’ve been able to take big advantages of the ones I have found.
As Buffett says, you only need 1-2 best ideas in a year.

Thankfully, I’ve found quite a handful this year.
In the upcoming premium spreadsheet release, I’ll be including EPV which includes adjustable input to the balance sheet.

Rgds,
Siddharth

MTXX: don’t understand pharma. Pass
QDHC: Can’t get a feel for the company. The numbers are all over the place for me. Pass
ONAV: not an expert on shipping but their cash flow looks terrific. Looks VERY cheap. I think it would be worth around $12.

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MTXX
QDHC
ONAV

Any thoughts?

With a company like MHH, I really don’t expect growth. The industry is highly competitive and I doubt MHH has a sustainable competitive advantage.
This is why I used a 0% growth rate. From what I see, the company should be in the $5-7 range with 0 growth.

But as you mentioned, MHH is trying to grow by acquiring companies. The only way I can be reassured is to look at how previous acquisitions have performed.
e.g. KTII is a company that has grown considerably through shrewd acquisitions where the CEO stuck to his guns and refused to overpay.

MHH as a standalone has a short history but I would have to go to the pre spin off parent company (igate) and look at how they handled acquisitions since the chairman of Mastech also helped found igate and the execution would be the same.

You could be onto something here. If I find out anything about bad mergers etc, I would either have to lower the valuation or sell if I am uncertain.

Just looked at IGTE financial statements and although they have goodwill on their books impairments have been either 0 or negligible. Will probably look into it further but mergers won’t destroy company value immediately. If a bad one is announced, I’ll have plenty of time to get out.

I’m not great at evaluating management as well and it’s the quality of the assets and earnings of a company that determines it price rather than who is at the helm.
I’ll try to look at RCMT deeper though but can’t guarantee whether I will be able to understand or analyse it.

—————-
Update
RCMT is a pure Graham net net. Liquidation value of $2.31.
They had a good 2nd quarter. 1st quarter results is inflated by $9.8m income from a lawsuit win.
So far $2m in FCF for the year excluding the $9.8m

Don’t think the company is worth more than $5. Probably around $4 but not sure how soon that value would be realised due to bad management.

Seems like Barel Karsan also sees the same thing I did.
http://www.barelkarsan.com/2009/08/when-goodwill-turns-evil.html

I just listened to the latest call that is up on the website. The one other thing that I learned, and make me a bit nervous is that both their ceo search, which I know they have since completed, and one of their key priorities is to make acquisistions. Since this is often a place that management stumbles and destroys value (either by paying too much, or not being able to integrate, or just by losing sight of day to day operations while focusing on the merger), how do you reasure yourself that they know what they are doing? One counterpoint is that management mentioned not issuing stock because of their currently low valuation, but still. . .?

thanks again,

aron

Pls. let me know what your conclusion is once you figure out more on RCMT. I personally don’t look at management, I just read rapidly what the business is but I’m buying based on balance sheet (I don’t know how to evaluate management)