Friday, April 22, 2016

COMX is as cheap as they come

Let's play 'value that company'.  Have a think about what you might pay for this:
  • cash $3M
  • total liabilities $2M
  • debt $750k
  • BV $6.3M
  • TBV $5.7M
  • 1.6M shares out
  • no preferred or warrants
  • revenue $10.3M
  • net income $1M 2015 vs $0.7M 2014 vs $0.4M 2013
  • EPS $0.62 vs $0.47 vs $0.24
  • catalyst:  Nothing.  Patience is your only hope here.  HA!

I'll go with $6 per share and then revisit once the 2016 numbers come out.  Here's a table with value estimates based on what you consider normalized earnings, excess cash, and an appropriate PE multiple.  I come up with somewhere between $4 - $10.  Based on revenue you may come up with something higher.  

OK so now let's talk about reality.  Comtrex Systems (COMX) is dark and they don't care about shareholders.  They de-registered from the SEC 13 years ago.  Fidelity won't allow me to buy any more shares because has a stop designation on them.  The company does give out an audited annual report to shareholders.  Recently the stock has sold for $1.60.  Let that sink in.  This company has more than doubled earnings in the past two years yet is trading for 85% of cash, 44% of TBV, 40% of BV, 25% of revenue, and 2.5x earnings.  

Why is it cheap:
It's tiny, dark, and there's no catalyst. Volume is non-existent so it takes patience not only to hold but also buy or sell.

What do they do:
Does it really matter?  This is one of those investments that takes about 2 minutes to make up your mind.  If you must know, they make point of sale systems for the hospitality industry.  They are incorporated in the US but most of their revenue comes through a UK subsidiary.  COMX was formed in 1981.  In 1996 they acquired the operations of a distributor in Atlanta.  In 1997 they acquired their UK distributor.  In 2008 the UK subsidiary acquired another UK company then another in 2014.  The UK accounts for 83% of sales.  

What will happen next:
The stock went up 300% from the start of 2012 through end of 2014 and has been flat since.  I imagine it'll take forever and maybe longer for this stock to reach full value.  I'll buy some more shares once I figure out what to do with my Fidelity accounts.  We should see another report in the fall

I should try reading some old SEC filings or otherwise investigate to find more info on management.  I wonder how old they are and how much of the company they own.

- Dan
disclosure: long COMX


  1. Thanks for the idea. Managed today (after some patience) to acquire a position @ $2.01. I'm quite certain this will prove to be cheap.

  2. A reader has pointed out (Thanks Paul) the COMX UK subsidiary posts their reports online. You can find them here:

    The latest annual was filed in Sept and looks really good. Revenue up 26%, earnings up 72%, BV up 33%

  3. where did you managed to get their annual report? cant find any report online

    1. The UK sub, which does most of their business, files online as mentioned above. For the complete company report you'll have to contact them. Shoot me an email if you'd like to know more

  4. Great find. Hard to get a hold of though.