Seeking Alpha

Martin Vlcek

 
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  • TGC Industries: Buy When Others Are Selling
     • Fri, Aug. 29 TGE 6 Comments

    Summary

    • Land-based seismic industry services sales and stock prices have been in a free fall due to oil and gas exploration companies’ spending cuts and project postponements.
    • The sentiment is extremely negative, exacerbated by a March bankruptcy of one of TGE’s peers.
    • However, TGE has strong financials and modern equipment. Seasonally strong quarters are coming, and TGE sees a pickup in demand, especially in the wireless services segment.
    • TGE has a very favorable reward/risk trading below $4 per share and at 1.2x tangible book value.
    • TGE has a $7.50 DFCF fair value price realizable within several years. TGE is also is cheap versus its peers.
  • ION Geophysical: Attractive Reward/Risk As Growth Segments Will Help Stabilize Falling Sales
     • Fri, Aug. 29 IO 2 Comments

    Summary

    • Sales from traditional, lower-margin seismic services and seismic equipment have been falling in ION and across the industry amid overcapacity, price pressures and increased competition.
    • Rapid expansion of sales from high-margin, highly specialized, ocean-bottom services and software services will help ION mitigate the fall and stay relevant in the later life-cycle of E&P projects.
    • Thanks to these strong growth areas, ION will perform better than most of its peers if the downturn continues, and will excel if the cycle rebounds.
    • At a $7 target price, ION’s stock offers a ~105% upside within several years as the cycle improves and growth segments outweigh legacy sales.
    • Despite large upside potential, downside risk should be protected as the cyclical weakness may continue.
  • Update: Regis Q2 Earnings - Sales Still Falling But At A Slower Rate As Turnaround Attempts Continue
    Thu, Aug. 28 RGS 6 Comments

    Summary

    • Regis' same-store sales continue sliding but at a much slower pace now. Service sales were flat while retail sales continued falling.
    • I reiterate my long thesis but lower my target price to $16 per share on higher turnaround costs and longer turnaround which is still uncertain.
    • My thesis correctly expected continued sales weakness but underestimated the costs and length of the turnaround which resulted in a flat stock price performance, underperforming the broad market.
  • CGG Offers Attractive Reward/Risk - If You See The Oil Through The Soil
     • Thu, Aug. 28 CGG Comment!

    Summary

    • Current seismic industry sales and stock prices are in a free fall, and future visibility is very diminished due to E&P spending cuts and project postponements.
    • CGG has a leading market share position in the seismic industry.
    • The strong position and low operating leverage in the highest-margin seismic equipment segment will protect CGG’s margins and solvency in a downturn.
    • CGG’s restructuring that is under way will align costs with lower sales and will add focus on high-margin equipment and geology/geophysics business.
    • At my target price of ~$16, CGG has an 80% upside within a few years but the downside should be protected because CGG’s price could fall further on industry weakness.
  • Update: RadioShack Reportedly In Talks To Avoid Bankruptcy - Stock Up 60% In A Week
    Wed, Aug. 27 RSH 23 Comments

    Summary

    • Several reputable sources reported that a 10% shareholder Standard General LP is in talks with RadioShack’s management about a possible financial rescue package to avoid bankruptcy.
    • I remain long RadioShack and reiterate my long thesis and a target price of $13 per share. However, until there is a real deal, the financial rescue is pure speculation.
    • A potential financial rescue package and an attempt to lift debt covenants were suggested in my long thesis from three weeks ago.
  • Dawson Geophysical Offers Favorable Reward/Risk Amid Industry-Wide Slump
     • Tue, Aug. 26 DWSN 4 Comments

    Summary

    • DWSN stock lost 45% in a year, in line with almost all peers amid industry-wide slowdown in seismic data investments by E&P oil and gas companies.
    • Current steep sales slump seems to be temporary, caused only by project delays, not cancellations. So far, bookings still remain strong. Nevertheless, there are risks of project cancellations.
    • On a positive note, late June and July demand shows signs of a rebound. Margins and earnings should rise going forward thanks to DWSN’s right-sizing of costs.
    • DWSN trades at 90% of its tangible book value, at the bottom of its peers and close to a multi-year low.
    • DWSN offers a compelling reward/risk opportunity with ~50% upside potential within several years and a target price of $34.
  • Update: LSI Industries Q2 Earnings - 7% Sales Jump But $0.03 Loss Per Share On One-Time Charges
    Mon, Aug. 25 LYTS Comment!

    Summary

    • While total revenues jumped 7% Y/Y, margins suffered as LYTS logged one-time write-off charges. LED division marched ahead with 16.8% Y/Y sales growth while graphics segment declined at 25% Y/Y.
    • I reiterate my long thesis. With my updated target price of ~$8, LYTS has a ~20% total return potential within the next 12 months on improving margins.
    • My thesis was precise in seeing the near-term catalyst but also the lower long-term fair value. LYTS quickly jumped 30% on the catalyst only to later give up all gains.
  • Update: Echelon Acquires Lumewave, A Smart Street Lighting Control Provider
    Thu, Aug. 21 ELON Comment!

    Summary

    • Echelon announced acquisition of Lumewave, Inc. Terms of the transaction were not disclosed. Lumewave’s current sales were not disclosed either but they will definitely not be material to ELON.
    • While my thesis didn’t anticipate an acquisition, Lumewave’s acquisition tries to revive Echelon’s falling sales in the Internet of Things segment where future growth lies.
    • I confirm my thesis that investors should wait for a clear signal that the sales and margins stopped deteriorating before buying ELON.
  • Update: Extreme Networks Q2 Earnings Better Than Expected, Enterasys Integration Progressing Well
    Fri, Aug. 15 EXTR 2 Comments

    Summary

    • Revenue reached $155.3M and GAAP loss was $0.17 per share. The North American integration issues seem to be over now. EXTR is getting ready for the E-rate program.
    • The long thesis has worked very well on continued growth, successful acquisition and renewed E-rate program. The stock was up over 100% at the peak, and is still up ~25%.
    • I confirm my long EXTR thesis on expected E-rate program sales bump and strong performance of the acquisition. I raise my target price slightly to $5.5, representing a ~10% upside.
  • Update: Silvercrest Asset Management Q2 Earnings - AUM And Sales Growth Continue Despite Weaker Stock Market
    Fri, Aug. 15 SAMG Comment!

    Summary

    • AUM and revenue continued to grow, albeit at a slower rate. EPS was $0.18, dividend unchanged, yielding ~3.1% annualized.
    • The long thesis was initiated only recently. Due to weaker Q2 stock market performance, SAMG lost some AUM growth speed and the stock is down ~5% since my recommendation.
    • I confirm my long SAMG thesis and the target price of ~$18.4 within a year, offering a ~12% upside potential within a year.
  • Artisan Partners Asset Management: Continued Rapid Expansion Of International Client Base Will Drive Future Growth
     • Thu, Aug. 14 APAM 2 Comments

    Summary

    • Overall, APAM’s strategies show excellent track record of beating the benchmarks over the full market cycle. Recent one-way, always up market has been hurting short-term relative performance.
    • APAM’s international strategies continue to gain traction as investors have been rebalancing from U.S. stocks, especially the small caps, toward international exposure.
    • For Q2, APAM reported another solid quarter, with AUM rising 31% Y/Y, revenues up 27% Y/Y and EPS up 10.5% Y/Y. International client AUM and base continue to rapidly grow.
    • July numbers show net cash outflows, in line with the general industry trend, as U.S. stocks, and small-caps in particular, have witnessed price weakness and fund outflows.
    • APAM continues to be an attractive investment with ~11% upside plus 4% dividend yield within the next 12 months.
  • Update: Oclaro Reported Improving Q2 Earnings Numbers But Weak Guidance Surprised
    Thu, Aug. 14 OCLR 6 Comments

    Summary

    • Revenue was up 0.5% Y/Y, margins and EBITDA loss improved but Q3 guidance was surprisingly weak. EBITDA turnaround expected in a year on $100M quarterly sales.
    • The contrarian turnaround thesis is taking a pause now as OCLR's Q3 guidance disappoints. The costs are lower but sales are expected to keep falling in Q3.
    • I confirm my long thesis but update my target price down to $2.3 per share on weak sales guidance. The stock still offers a ~30% upside within two years.
  • Update: Applied Industrial Technologies Q2 Earnings - Revenue Regains Some Momentum But EPS Still Down
    Wed, Aug. 13 AIT Comment!

    Summary

    • Revenue was up 2.2% Q/Q, showing strong momentum after flat sales. EPS was down 6.5% Y/Y for Q2 and down 4% for the full fiscal year.
    • The long thesis worked out relatively well until today’s post-earnings 4% dip, which I see as a buying opportunity in the long run.
    • I confirm my long thesis and see a target price of $51 within 12 months, providing a 10% upside plus the 2% dividend yield.
  • Update: Electro Rent Q2 Earnings - Revenues Up Slightly But Margin Pressure Continues
    Tue, Aug. 12 ELRC 1 Comment

    Summary

    • Revenue eked out a 1% gain Y/Y in Q2 but was down 3% for the full fiscal year. Operating margin fell to 11.9% from 16.2% and EPS was $0.19.
    • As I expected, ELRC performance was mediocre. Thanks to high dividends, investors are breaking even on my advice to buy on dips if they didn’t sell the 25% November spike.
    • I confirm my long ELRC thesis and the $16.7 target price within two years, offering a 10% two-year upside plus the 5% annual yield but the performance will remain mediocre.
  • Update: Stantec's Q2 Earnings - Strong Sales And EPS Growth Continues, Guidance Confirmed
    Tue, Aug. 12 STN 1 Comment

    Summary

    • Revenue increased 11.8% Y/Y, of which 3.7% was organic, mainly on continued oil & gas sector strength. Diluted EPS rose 20.5% Y/Y, dividend unchanged sequentially but up 7% Y/Y.
    • My thesis is only one month long but already shows signs of strength as STN posted very solid quarterly results and its stock gained over 2% in a month.
    • I confirm my long STN thesis and see it reaching a target price of $76.5 within a year, proving an ~18% upside and further 10% to 15% per year afterwards.
  • Update: Magic Software Earnings - Sales Up 17%, Confirms Forward Guidance
    Tue, Aug. 12 MGIC Comment!

    Summary

    • Revenues continue rising, 17% Y/Y. Margins decreased slightly and EPS was flat Y/Y due to the 11% share dilution from secondary offering. Allstate temporarily hurt by AT&T Direct TV merger.
    • My thesis worked well on continued growth. In six months, the stock returned over 60% as it hit my most optimistic target almost precisely. It later retreated after secondary offering.
    • I confirm my long thesis and my target price. I see MGIC at $9.89 again within a year as growth continues, offering a ~35% upside.
  • Update: NeoPhotonics Q2 Earnings: Record Revenue But Falling Margins And Weaker Cash Position
    Tue, Aug. 12 NPTN 6 Comments

    Summary

    • Revenues increased 3% Y/Y and 13.6% Q/Q, however, margins continued to decline and cash reserves continued to decrease.
    • The risks in the thesis materialized and the stock continued to fall and a successful, lasting turnaround remains an unlikely outcome.
    • Because of a deteriorating cash position, further restructuring costs on the way and expensive or unavailable downside protection, I cannot recommend a NPTN purchase now.
  • Update: Multi-Fineline Electronix Earnings - In Line, Showing A Break-Even May Be Near
    Mon, Aug. 11 MFLX Comment!

    Summary

    • Revenues still fell by 4% Y/Y but sales to new customers skyrocketed ~200% Y/Y. While MFLX still posted an EPS loss, forward guidance expects non-GAAP breakeven.
    • The long thesis worked well, with a ~20% gain in three months as my target price was hit. However, the stock later fell below the initial level.
    • I reiterate my long thesis. MFLX offers another attractive entry point with ~50% upside within two years. However, downside should be fully protected at 10% below the purchase price.
  • Update: ESCO Q2 Earnings - Revenue Misses But Earnings Beat, Sales And EPS Up Y/Y
    Mon, Aug. 11 ESE Comment!

    Summary

    • Revenues increased 12% Y/Y, primarily due to an acquisition. EPS improved significantly from $0.24 to $0.43.
    • The long thesis has been working well, with waiting for the dip paying off as the stock price otherwise just remained flat Y/Y.
    • I reiterate my long thesis but investors should again wait for a ~10% pullback to improve reward-risk. My target price is then $37, offering a ~9% upside.
  • Update: Houston Wire & Cable Q2 Earnings - Record Margins On Robust Sales Growth
    Mon, Aug. 11 HWCC Comment!

    Summary

    • Revenues increased 4.2% Y/Y, or 7% when adjusted for lower metals prices. Given the tough commodity environment and still reluctant capital investment environment, HWCC is performing really well.
    • The long thesis has been working well so far as HWCC was able to remain resilient despite strong metals price headwinds and still uneven recovery in some regions.
    • I reiterate my long thesis and confirm my target price at $14.80, giving the stock a ~20$ upside within two years plus the 4% annual dividend yield.
  • Update: Echelon's Q2 Earnings - Sales And Margins Continue Falling, Outlook Expects More Weakness
    Mon, Aug. 11 ELON Comment!

    Summary

    • Total revenues fell 40% Y/Y, especially on weak smart grid sales. Company plans to downsize the Grid business after a failed attempt to sell. Restructuring costs can be expected.
    • Investors should wait for a clear confirmation that the sales and margins stopped deteriorating. More stock weakness may be ahead due to restructuring and falling sales before things get better.
    • My thesis worked extremely well in terms of the advice to wait for a 20% pullback. After the dip, the stock skyrocketed 100% but later fell to the original level.
  • Update: Seneca's Q2 Earnings - 3.4% Sales Growth But Negative EPS. New Share Buyback And Acquisition
    Mon, Aug. 11 SENEA Comment!

    Summary

    • Sales grew 3.4% Y/Y but EPS disappointed, being negative $(0.01) per share. The stock still trades at 8.32x P/FCF, though and continues to be undervalued.
    • I reiterate my long thesis and keep my target price at ~$36, offering ~25% total upside within two to three years. Recent buyback announcement should provide the needed catalyst.
    • The stock traded relatively flat since my thesis but was very stable. With no dividends in a hunt-for-yield market, the stock lacked the catalyst for value realization.
  • Update: Delta Apparel's Q2 Earnings - Falling Sales And Margins Amid Unprecedented Fall Of Cotton Prices
    Mon, Aug. 11 DLA 14 Comments

    Summary

    • Sales fell 7% while income fell 44% Y/Y on slumping cotton prices that fell abruptly by ~30% in a matter of weeks.
    • I reiterate my long thesis but the downside should be protected as cotton prices may keep falling. However, company restructuring should yield better margins and higher stock price.
    • The long thesis has worked well for 7 months, gaining ~10%. But then DLA’s stock started underperforming, helped by falling cotton prices and a small-cap sell-off.
  • Update: Gaiam's Q2 Earnings Show Decent Sales Growth And Narrowing Loss
    Mon, Aug. 11 GAIA Comment!

    Summary

    • Revenue rose just 2% Y/Y. However, a normalized sales growth reached 9%. Comparable GAAP loss remained roughly flat Y/Y at $0.10 per share vs. $0.11 Y/Y. Margins improved 600bp.
    • I reiterate my long thesis and set my target price at $8.5, offering a ~20% upside, as I wait for the Gaiam TV spin-off to materialize in under a year.
    • The long thesis has worked well, as Gaiam continued to unlock value and re-focus on its core business. The stock gained ~60% at the peak in June.
  • Update: National Healthcare's Strong Q2 Results - Revenue Up 12.8%, Comparable Income Up 2%, Dividend Raised
    Sun, Aug. 10 NHC 1 Comment

    Summary

    • Revenue grew 12.8%, income decreased on higher start-up costs that will drive future sales, investments were strongly up, dividend increased by 6.25% Y/Y and Q/Q.
    • I reiterate my long thesis and raise my target to $70, providing for a total upside of ~25% within two years plus dividends yielding ~2.5% annualized.
    • The long thesis has worked well with NHC’s continued expansion of facilities and but also on strong comparable results.
  • Exar Q2 Earnings: Organic Revenue Keeps Falling, EPS Negative - Acquisition Saved The Day
    Sat, Aug. 9 EXAR Comment!

    Summary

    • Organic revenue has been falling for three quarters now. Total revenue growth was saved by the acquisition of Integrated Memory Logic. EPS was negative again.
    • I reiterate my long thesis, but I am lowering my target price to $10, offering a ~8% upside. The downside should be fully protected at 10% below the current price.
    • The long thesis has worked well for a year, with EXAR trading in line with the small-cap category which showed weakness. Last month, EXAR started underperforming.
  • Update: IXYS Corporation's Q2 Earnings Show Solid Sales, Rising EPS And Bookings
    Fri, Aug. 8 IXYS 8 Comments

    Summary

    • Revenue rose 23.7% Y/Y, boosted by acquisition of Samsung’s microcontroller business, EPS increased to $0.11 from $0.06 while gross margin fell slightly to 28.4% but bookings improved.
    • I am reiterating my long thesis, raising the target price due to improving operating results to $13 per share, offering a ~13% upside within 12 months. Volatility likely to continue.
    • The long thesis has worked almost precisely, with the stock currently trading at my target price.
  • RadioShack: Buying The Stock Outright Is Still A Losing Proposition. But With Downside Protection, It Is Becoming A Viable Bet
    Fri, Aug. 8 RSH 38 Comments

    Summary

    • Buying RadioShack stock outright is still a losing proposition due to high probability of bankruptcy or a large share dilution.
    • Using a downside protection, it is becoming a viable bet. But it remains highly contrarian and purely speculative gambling.
    • I hold a small long position using options as a contrarian bet for entertainment purposes only. Investors should not invest in RSH, except for highly speculative, entertainment purposes.
  • Update: Caesarstone Q2 Earnings Rock-Solid Again - Guidance Increased
    Fri, Aug. 8 CSTE 4 Comments

    Summary

    • Revenue rose 30.4% Y/Y, driven again by accelerated 55% Y/Y U.S. sales expansion as the company continues to increase production capacity amid surging demand.
    • I am reiterating my long thesis and raising my target price to $70 from $58 after the strong sales and guidance increase. CSTE remains one of my strongest-conviction long-term recommendations.
    • The long thesis keeps working very well. The stock gained ~50% since November at its peak, and is still up ~28% after the dip which I recommended to buy.
  • Update: Delek Logistics Partners' Q2 Earnings Please Investors With 85% Y/Y Net Income Growth And 20% Distribution Growth
    Fri, Aug. 8 DKL Comment!

    Summary

    • Net income increased 85% Y/Y and distribution payments rose 20.3% Y/Y. Current distribution yield is ~4.9%.
    • I am reiterating my long thesis with a target price of $40, giving the stock a ~11% upside plus a ~5% cash distribution yield for a total one-year 16% return.
    • The long thesis worked well, with DKL increasing its cash distributions by 20% Y/Y on strong results. DKL is a long-term, buy-and-hold investment for income investors.
  • Update: AECOM Technology Reports Mixed Q2 Results
    Thu, Aug. 7 ACM Comment!

    Summary

    • Gross revenue down 4.8% Y/Y, operating income down 18.2%, EPS flat, new wins up 22% Y/Y and backlog up 22% Y/Y. Acquisition of URS expected to close in October.
    • I am reiterating my long thesis and my recent $36 target price, offering just a 7% upside within a year due to potential acquisition integration setbacks and revenue weakness.
    • The weak Q2 numbers further confirmed my already conservative outlook in my previous update. Integration of two large acquisitions at a time of falling organic sales will present a challenge.
  • Update: Strattec Security Earnings - Strong Sales Growth, EPS Surge And Expanding Margins
    Wed, Aug. 6 STRT Comment!

    Summary

    • Net sales were up 25% Y/Y, EPS was up 71% Y/Y on expanding margins.
    • Despite the 60% stock gains, I am reiterating my long thesis and see ~25% more upside within a year with a target price of $80. Downside should be protected though.
    • My long thesis based on continued automotive and other tailwinds worked extremely well. The stock gained 75% at its peak and surpassed my targets of 25% to 45% upside.