This week the planets aligned and two net/nets -- companies trading below net current asset value -- reported profitable quarters after the market closed on Wednesday. That may seem like a minor event, but not to a deep-value investor operating in an environment where the population of net/nets is so small.
VOXX International Corp. (VOXX) reported rather odd third-quarter results. While revenue fell 17% versus the like quarter last year, gross margins improved significantly and the company earned $12.2 million, or 50 cents a share. Because no analysts cover the company, there is no consensus for comparison.
VOXX ended the quarter with $48.8 million, or $2 per share, in cash and $17 million in debt. It trades at just 0.65x net current asset value and at 0.45x tangible book value. Shares rose 6% on Thursday on the earnings news and are up 19% year to date, but were down 29% in 2018. Welcome to the wonderful world of net/nets -- small, confusing names that are relatively unknown to investors and lack analyst coverage.
Meanwhile, Richardson Electronics Ltd. (RELL) enjoyed its fourth consecutive profitable quarter, but results that were below "consensus" -- just one analyst covers the name -- pushed its shares nearly 9.5% lower on Thursday. Revenue of $41.3 million missed the $44.8 million consensus but was nearly 6% higher than the year-earlier quarter. Earnings of three cents a share were below the five-cent estimate. Still, a profitable quarter is a profitable quarter.
Richardson Electronics' balance sheet remains very strong, as the company ended the quarter with $53 million, or more than $4 per share, in cash and investments. RELL currently trades at 0.87x net current asset value and 0.78x tangible book value. The company continues to pay a six-cent quarterly dividend and yields 3.2%. Richardson Electronics is now down nearly 13% year to date, but enjoyed a solid 2018 and was up more than 32%.
Richardson Electronics appears to be heading in the right direction in terms of revenue. However, I would like to see the company consider buying back some shares. With 55% of its market cap in cash, the company has relatively ample resources and a buyback not only would display management's confidence in the business but also might draw more investor interest.
