Alico Inc (NAS:ALCO) — mrkt cap $209mm; Price $27.30; EV/EBITDA NA
PASS. Alico, Florida’s largest orange producer, owns ~50,000 acres of valuable land with attractive contracts locked in with Tropicana. The company has monetized land sales and used the proceeds to pay down substantial debt—something we always like to see. However, the stock price hasn’t responded as expected, largely due to disappointing production levels caused by citrus greening, a bacterial disease devastating citrus producers. The company has also faced challenges from inclement weather and hurricanes. There’s hope that the 2.5 million trees planted in 2017 will soon produce quality fruit, and that trunk-injected bacterial treatment (Oxytetracycline) will have a positive impact. That said, it’s difficult to assess the trees’ condition—if we could gain confidence that they’re largely okay, this would be a classic value play. (If anyone has insight, please reach out.)
IPG Photonics (NAS:IPGP) — mrkt cap $2.9B; Price $67.30; EV/EBITDA 11
MORE RESEARCH NEEDED. IPGP is the global leader in fiber lasers, which are primarily used for cutting and welding metals, with significant applications in the automotive industry. While the fiber laser industry has expanded largely due to the growth of electric vehicles, IPGP’s revenue has stagnated in recent years as low-cost Chinese competitors have gained market share, particularly in Asia, where customers prioritize cost over service. A new CEO has recently taken over, with a focus on driving organic growth and generating free cash flow. We are awaiting further clarity on the strategy to achieve these goals.
Consensus Cloud (NAS:CCSI) — mrkt cap $380mm; Price $19.64; EV/EBITDA 6
PASS. CCSI specializes in providing cloud-based fax technology for the healthcare industry, enabling digital transmission of documents over phone lines. The company benefits from healthcare providers transitioning from on-premise fax hardware to digital solutions. Fax remains prevalent due to the lack of interoperability among different electronic health record systems used by hospitals. Unlike email, fax is HIPAA-compliant, ensuring secure communication. However, emerging standards may soon enable hospitals to share information securely and freely. Given the likelihood of flat to declining revenues and a $600 million debt load, CCSI is too expensive.