In my neverending quest to find value (a difficult task these days), I often rely on stock screens that use criteria borrowed from some of history's great value investors. One of these tries to locate so-called "net/nets," or companies that trade below net current asset value (current assets less all liabilities).
For my latest screen, I expanded typical net/net criteria to include stocks trading at between 1x and 2x of net current asset value (or "NCAV"). Companies selling at that level are extremely cheap, so I call them "double nets."
I also used the following additional criteria for this screen:
- Market cap greater than $250 million.
- Companies must trade on a major exchange and be U.S. domiciled.
- No financial companies.
Well, the screen came up with 25 stocks, and I'll periodically devote columns to some of the more interesting names that it found.
Today, let's check out AVX Corp. (AVX), which seems to be a perennial "double net." It's appeared on this screen on and off for years.
That's not necessarily a positive, as it could mean the company inherently trades at a low multiple relative to NCAV. However, it's hard to ignore this relatively unknown electronic-component manufacturer.
AVX currently trades at 1.53x NCAV and 1.2x tangible book value, and its balance sheet is stellar. The company ended its latest quarter with $869 million in cash and short-term investments, or $5.18 per share. It also had another $150 million, or $0.89 per share, in long-term investments (i.e., corporate bonds).
In other words, investors who buy the stock today at around $13.50 a share are getting just over $6 a share in cash and investments. AVX also owns 18 manufacturing and research facilities in America and several other countries, representing more than 3.7 million square feet of space. Lastly, the company has no debt and pays a solid $0.105 quarterly dividend -- giving the stock a 3.1% yield.
If there's any knock on AVX, it's that the company's revenues have been slipping. Top-line results fell 6.2% to $1.353 billion during fiscal-year 2015, with revenue dropping nearly 17% year over year in the latest quarter.
However, $18 million of the latest shortfall stemmed from negative currency impacts. AVX also managed to nonetheless deliver a 9.2% net profit margin and $27.9 million of net income ($0.17 per share) for the quarter.
For the fiscal year as a whole, the company earned $226 million, or $1.34 per share. That represents a solid 16.7% net profit margin, although those results did include a $7.2 million tax benefit.
Among regions, nearly 42% of AVG's fiscal-year revenue came from Asia. That's down nearly 15% from the prior year, showing that any economic slowdowns in China or the rest of the Asia have a big impact on the company's top line. Revenues from Europe (28%) and the Americas (30%) were relatively flat.
The Bottom Line
AVX garners little analyst coverage and won't be on the buy list of many growth-oriented investors. But it's interesting from a value perspective.
Stay tuned for more "double nets" in future columns!
