Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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| Ecology
& Environment (EEI) Poised to Benefit from Increasing Demand
for Environmental Cleanup Efforts |
Published: September 20, 2005
In my weekly premium
newsletter -- Undiscovered
Micro-Cap Gems -- my goal is to introduce readers to a variety of
promising undervalued investing ideas that they may wish to consider for
their portfolios. In doing so, I generally look for small, neglected
companies that have been overlooked by conventional Wall Street sources.
I also look for undervalued firms that are trading at a steep discount
to their intrinsic value. Many of these individual investment ideas have
the potential to deliver triple-digit percentage gains in the years
ahead.
Below you'll find an
in-depth look at one such investing idea that I introduced my readers to
in a recent issue. To gain access to dozens of similar investing ideas
each and every week, you'll need to subscribe to my Undiscovered
Micro-Cap Gems service. In the meantime, I sincerely hope you enjoy
today's sneak peak at one of my most recent micro-cap investing ideas...
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Ecology & Environment (EEI, $7.70)
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Ecology
& Environment (EEI)
Sector = Industrial Goods
Industry = Waste Management
Market Cap. = $31.3 Million
Enterprise Value = $31.3 Million
2004 Revenues = $89.5 million
2004 Gross Profit = $40.5 million
2004 Revenue Growth = -1.1%
Insider Ownership = 72.9%
Institutional Ownership = 15.7%
Insider Activity (ttm) = Positive
Enterprise Value/EBITDA = 9.2 |
Ecology & Environment is an
environmental consulting and testing firm. The company, which has
operations in more than thirty countries across the globe, operates in
three business segments: consulting services, analytical laboratory
services, and aquaculture. EEI provides a number of assessment and
testing services, mostly for government agencies. Among other things,
the firm conducts environmental impact assessments, tests wastewater,
evaluates hazardous waste sites, and helps respond to spills of
hazardous materials.
While I dislike the dual-class share structure of this stock (this is a
topic I have mentioned in past newsletters), I believe that EEI still
has much to offer. To begin, after giving back nearly one-fourth of
their value over the past twelve months, the shares are now trading at a
compellingly low valuation level. As the table below illustrates, the
stock is attractively valued relative to its industry peers.
| |
P/B |
EV/GP |
P/FCF |
P/S |
| EEI |
0.9 |
0.7 |
7.7 |
0.4 |
| Industry
Average |
3.2 |
N/A |
24.6 |
1.7 |
The market has placed a total
value on the entire firm of around $30 million. This is not much more than
its working capital of $26 million and is only three-fourths of its
trailing annual gross profits of $40 million.
Furthermore, while many firms of this size struggle with their cash
flows, EEI has generated sufficient cash to distribute 38 consecutive
dividend payments, and has not missed a payment since becoming a
publicly traded company. Currently, the firm pays out semi-annual
dividends of $0.17 per share, which equates to a generous yield of more
than 4.5% -- nearly double the industry average. Not only that, but the
company has also produced enough cash to also fund a share repurchase
program, spending $639,000 to buy back stock over the last year alone.
While I am slightly concerned by the fact that just a handful of
insiders control nearly three-fourths of the outstanding shares, it's
encouraging to see that insider activity has been generally positive
over the past year. In fact, several executives have purchased a
significant number of shares over the past few months near current
prices.
Earlier this month, EEI was awarded a five-year, $20 million contract to
provide environmental planning and engineering services for the Naval
Facilities Engineering Command Atlantic in Norfolk, Virginia. In
addition, just yesterday the firm announced that it would be awarded
several government contracts to help with the cleanup efforts in the
aftermath of Hurricane Katrina. While the
stock initially bounced sharply higher on both of these news items, it has since relinquished most
of those gains -- providing investors with a much safer entry point.
For income-oriented investors looking for a defensive pick to round out
their portfolios, EEI might be a solid choice. First, the fact that the
company has been able to sustain uninterrupted dividend payments for so
long underscores its ability to generate ample cash in both up and down
markets.
Next, the firm maintains a stellar balance sheet, with more than $3.4
million in cash and a microscopic 0.01 debt/equity ratio. EEI also has a
very healthy current ratio (a measure of its ability to meet short-term
obligations) of 2.2 -- almost double the 1.2 of the S&P 500 and
nearly triple the 0.8 of its average competitor.
Finally, the very low beta of 0.27 indicates the shares seldom move in
lockstep with the broader markets, meaning they could hold up well even
in a declining market. In fact, during the bear market of 2001, EEI
posted an impressive +63.5% gain.
All things considered, EEI has the potential to deliver attractive total
returns. Meanwhile, the 4.5% yield should help provide extra incentive
to wait out a turnaround.
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Important Note: The above article
was merely a small excerpt from a recent issue we sent to subscribers of
our premium value investing service -- Margin-of-Safety
Investing. In each issue of that newsletter, editors Nathan
Slaughter and Paul Tracy deliver an in-depth look at a variety of other deeply discounted
stocks that should provide investors with a solid margin of safety at
current prices. To receive your copy of our most recent issue of Margin-of-Safety
Investing, as well as other guidance similar to this twice per
month, you'll need to subscribe to this publication. To learn more,
please visit:
https://www.streetauthority.com/subscribe-msi.asp
Thanks for reading!
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Nathan Slaughter
Editor
Half-Priced Stocks, The ETF Authority
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in-depth guidance on today's leading value opportunities, plus educational guidance, please subscribe to
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