Magnetek (NYSE:MAG) Investment Thesis
MAG shares offer big-time upside potential. The company is a cash flow machine: between January 2007 and December 2012, unrestricted cash balances grew from $7m to $29m even after contributing $50m to the company's pension plan and operating through terrible economic conditions. Shares are super cheap at 7x EPS and 8x EBITDA on a TTM basis. Investors have left the company for dead given its gigantic unfunded pension, which sits at $98m and comprises a daunting 82% of the company's enterprise value.
How did this happen? MAG used to be a $1b industrial electro-mechanical company, but was forced to retain the pension liability as its business units were divested in the late 1990s and...
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