3x EV/FCF, Net Cash, Insider Buying, Big Buyback | Deep Dive
A family business being transformed by its first professional CEO
The setup:
On track for 2-3x EV/FCF
Net cash is one-third of the market cap
Excellent CEO who just doubled margins
Chair, CEO, and CFO all bought stock a few weeks ago
Buying back 15% of the share count
This is a ‘real’ industrial company that is US-listed, generates most of its revenues in the US, has been in business for decades, and consistently grown revenues.
Why does this opportunity exist?
The company was run by its founding family until recently. One former employee told me the CEO was “a really good guy but didn’t drive for efficiencies.”
That changed when a well-known large shareholder pushed for change. The company now has a refreshed board, its first professional CEO, and a new senior management team. The new team has already doubled EBIT margins.
The stock remains a ‘hidden gem’: The market cap is under $500mm, the stock trades $5-10mm/day, and is only covered by two sell-side analysts.
This writeup is built on primary research — five interviews with former employees and two background checks on the new CEO. Paid subscribers get:
The bridge to EBIT margins doubling again
What the company is likely to do with its cash
Valuation scenarios over three years
The precedent: a similar turnaround that took that stock from $15 to $265
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