Travel Centers of America: Undervalued Stock?

Sep. 2.09 | About: TravelCenters of (TA)

I have started looking into Travel Centers of America (NYSEMKT:TA) as a possible value play. The stock is currently trading at a little over $3 per share and at its peak a few years ago it had traded as high as $46 per share. The company has suffered the last year and half due to declines in the trucking volumes during the recession. The trick here is to figure out whether the company will be profitable again as the economy rebounds.

On the surface, the financials appear to be really good with almost $182 million in cash and about $100 million in debt. As a reference, the current market capitalization of the company is short of $60 million. Its book value also seems to be in the $20 per share range compared to its share price of around $3.25. As you would imagine, this does not always tell the whole story. This company operates in an industry where working capital and cash flow can make or break a company. At first glance, the company appears to have been generating positive or close to zero cash flow every quarter (cash on hand has increased year over year but that could mean anything).

This stock came to my attention as Leucadia initiated a small position in it a while back.

A more detailed analysis will follow and if it appears to be an otherwise not very distressed company with a distressed stock price with a potential for great capital appreciation as the economy improves, I will initiate a position.