Undiscovered Stocks
Long/short equity

Mesa Laboratories: A Highly Overvalued Levered Rollup With Low Single-Digit Organic Growth And Aggressive Insider Selling

On the surface, Mesa Laboratories (NASDAQ:MLAB) looks interesting. This is a company with 60% gross margins and 20% operating margins in an attractive industry. However, when I take a closer look at the business, I realize that all the growth is generated by acquisitions and that the company is only growing 2% organically. Hence, investors are paying 5 times sales for a rollup with almost zero organic growth. Furthermore, not only is the stock highly illiquid, but insiders have been quietly, but aggressively, selling their shares. The company also continues to lever up the balance sheet while trying to convince shareholders that they will be able to create synergies from all the acquisitions they have made (four in...

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