Brendan Rose
Long/short equity, CFA, micro-cap, small-cap

Clearfield: Nice Company, But About 1/3 As Nice As Investors Think

Clearfield (NASDAQ:CLFD) is a real nice company. They've enjoyed profitable growth in a tough industry by delivering products that small cable and Telco operators value. It's a genuine "success by targeting underserved markets" story. But investors have gone insane and slapped a 50 P/E and 6.5x P/Book on a 13% ROE operation that, by its structure and business model, can't plausibly live up to that expectation burden. Clearfield is worth no more than $7-11, which I'll show.

But let's compliment them first:

The numbers speak for themselves (though note that 2011 and 2012 GAAP EPS is inflated by tax benefits; the $0.36 earned in F2013 was an all-time normalized record).

Clearfield's fiscal year ends in September, so their...

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