Cenveo: Printing Company Significantly Undervalued For 2013

| About: Cenveo, Inc. (CVO)

Cenveo (NYSE:CVO) is the third largest commercial printer in the United States. Despite its position, Cenveo is in a declining market. That fact has shares trading at price-to-earnings multiples of under 10. Shares now look like a value play as earnings are expected to rise in 2013. Here is a look at the company.

Here are the industries that Cenveo operates in:

· Labels

· Packaging

· Envelopes

· Digital Printing

· Commercial Printing

· Journals & Magazines

· Mailing Service

· Books & Directories

· Creative Services

The company owns several subsidiary companies that are leaders in their respective fields. Rx Technology is the largest producer of prescription labels in the United States. Each year, the company makes over 1.4 billion sets for leading pharmacies. The company's Nashua unit is responsible for producing entertainment labels. Cenveo also has a direct mail relationship with the United States Postal Service.

The company's most promising unit is its Gilbreth company that makes shrink sleeves for bottles. The company has working relationships with leaders in several fields including: Procter and Gamble, Unilever, Coca-Cola, Clorox, Church and Dwight, Pfizer, Merck, GNC, Absolut, and Dr. Pepper Snapple. The unit is continuing to come up with new technology and is a staple in the labeling market of the United States.

In fiscal 2013, analysts expect the company to post $1.8 billion in revenue. Fiscal 2012 will likely see $1.8 billion in revenue. This gives shares a price-to-sales ratio of 0.10. Shares trade at low prices because of the company's high debt levels. Shortly after the third quarter, Cenveo refinanced its 2013 maturing debt. The new financing will allow the company to wait until 2017 to pay off.

In the third quarter of 2012, Cenveo posted revenue of $451.3 million. This was a decrease from the previous year's $475.8 million. The company made steps to improve its financial position by exiting low margin businesses and consolidating printing plants.

On February 25th, Cenveo will report fourth quarter earnings. Analysts are expecting earnings per share of $0.17. Cenveo beat analysts' projections in two of the last three quarters and have $0.23 earned in the first nine months. For the year, analysts predict Cenveo will have earned $0.36. If Cenveo matches analysts' projections, it will have earned $0.40 for the fiscal year. This would give shares a price-to-earnings ratio of 7.3 at today's price of $2.93.

For fiscal 2013, analysts expect Cenveo to post earnings per share of $0.54. This is where the real value of shares comes in. Shares are now trading at only 5.4 times the projected earnings per share. Cenveo will hopefully issue 2013 guidance during its fourth quarter earnings call. Shares should trade at closer to a multiple of 10, which would represent an increase of 84% from today's share price. However, if Cenveo provides increased guidance or beats fourth quarter earnings, the company could see shares hit $6.00, representing an increase of 100%.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CVO over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.