Undervalued -- and then some! The stock is trading below book value (which has been improving dramatically since the restructuring) and at less than three times earnings.
I called the company a short while ago to get their impressions as to why the stock was trading at such a discount. They had no particular explanation. My thoughts are: (1) They had some financial problems in the past and have that history to overcome. With each quarter they are producing earnings, cash flow and shareholder value, so it is just a matter of time before the shadows of the past fade. (2) CUQ trades on the ASE, and the VSE and ASE have been the forgotten relatives lately because of depressed commodity prices, recent scandals (the 'B' word) on the smaller exchanges, global financial uncertainty causing investors to flee to safer large-cap issues, and, as you pointed out, the fixation on Internet plays. (3) Anything even remotely connected with the oil patch has been hurt by the drop in oil prices. CUQ is based out west and does a great deal of work in Alberta and has suffered along with all the petroleum producers and service companies. (4) The company tends to be quite low-key.
I asked if they were working on any particular strategies to raise the profile of the company and was told 'no', that they were going to continue to concentrate on building a solid company and growing shareholder value and that the market would eventually recognize this stock as being undervalued. In the meantime, the company is able to execute the share buy-back/cancellation at a terrific price, as are bargain-hunters (like me).
This is an established, diversified, profitable company which is highly respected in industry and whose management is very conscious of the bottom line and totally committed to growing the company and shareholder value in an methodical, disciplined manner. That would be an impressive package to me even at a 'normal' p/e ratio. At the current prices its risk potential is almost nil and the reward potential is very attractive. If the P/E ratio on this stock goes to just 10, that's a 3-bagger from here. CUQ will never behave like the Internet stocks have been, but I absolutely expect to make decent money with it over the next couple of years.
Fiscal 1998 ended Dec. 31. I'm looking forward to seeing the financials, but it'll won't be for awhile. Last year's report came out the first week of May.
Good luck,
JP |
