On March 8th, I welcomed Clay Mahaffey, CFA, to my nationally syndicated "The George Jarkesy Show" where we focus on educating and informing individual investors. During the daily segment "Stock Watch" ideas are presented and the case is made for a company of interest. We discussed the company Cenevo (CVO) which Clay felt was undervalued at its current price. Mr. Mahaffey, who is the chief analyst of The National Eagles and Angels Association, felt as if Cenevo has done the right things to restructure the company to get back on the right footing. Below is the interview in full.
Announcer: Stock Watch is brought to you by the National Eagles and Angels Association. And now, Stock Watch.
George Jarkesy: That's right. Stop what you're doing. Pull over off the highway. Turn up the radio. Get your pen, get your paper. We have the Clay Mahaffey, the Chief Analyst of the National Eagles and Angels with us. Clay, tell us what stock you have for our listeners today.
Clay Mahaffey: Okay, George. Today the stock is Cenveo. This is a New York Stock Exchange company that trades under the symbol CVO. I like this stock because it is incredibly cheap at $4.90. Cenveo is the third largest printer in the company. They have a very diversified business, primarily labels and envelopes and commercial printing. They are active in direct mail fulfillment. They print books, magazines, a variety of materials. They generate revenue of about $2 billion. They have 100,000 customers. They have 67 manufacturing facilities. This is a big company. That's the good news.
The bad news, George, is that in 2007, they took on a lot of debt to make an acquisition just before the recession hit. The stock fell from $26.00 down to $4.00. In the last couple of years, they've taken a lot of strong steps to restructure the company. They've reduced their debt, reduced the interest rate. They've laid off employees. They've shut down plants. They sold business. They acquired other businesses with more growth prospects.
They've really turned the company around. It's currently come up to about $5.00, but based on the cash flow that they're projecting, they've turned it around as cash flow positive as of the fourth quarter, of 11. On the current valuation, the analysts following the stock think it will hit $11.00 next year. I would agree with that. Between $10.00 and $12.00 would be a reasonable price target. That's 100 percent gain from here.
George Jarkesy: What kind of earnings are they looking at projecting that will get it to move to $11, or is it earnings-based?
Clay Mahaffey: It's cash flow based. They have $1.2 billion in debt. There's a lot of debt, but they're working it down. They're renegotiating $500 million as we speak. It's a cash flow play. It's an established company that's restructuring and turning the corner.
George Jarkesy: America should take a lesson from that company. Restructuring its debt, huh?
Clay Mahaffey: Yeah. They're doing something. They made a mistake. Their timing was off. They were a little aggressive back in '07. Now they've fixed the ship and got it on course.
George Jarkesy: What's the symbol again?
Clay Mahaffey: The symbol is CVO.
George Jarkesy: CVO; Charlie, Victor, Oscar.
Clay Mahaffey: Yeah.
George Jarkesy: Now, Clay Mahaffey, you're going to be Houston at the National Eagles and Angels luncheon on March, 29th, right?
Clay Mahaffey: Right.
George Jarkesy: And you're going to be talking about the Micro-Dynamic Portfolio. It was up over 250 percent last year, right?
Clay Mahaffey: Yeah, it was a good year.
George Jarkesy: So all the members that participated and bought the Micro-Dynamic Portfolio did very well last year. You'll be able to meet Clay Mahaffey. You'll be able to meet me, George Jarkesy, and also Dwayne Deslatte.
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