Pacific Health Care Organization (OTCQB:PFHO) reported earnings last week. Things to note:
- Revenues fell 13.1% y/y
- Net Income fell 14%
More importantly, as I mentioned in the original post, the costs are very variable because costs for the segments that those two clients were concentrated in are outsourced. The company shed the costs under that by 38% and was able to keep net margins in-line with sales.
A look at the updated balance sheet above shows a cash balance of $3.8 million, Acct receivable of $1.04 million. If we take the rest of the current assets at face value and then assume that the rest of the assets (long-term) are worth nothing, then the hypothetical book value comes out to $5.222 - $0.385 = $4.835
The liquidation value comes out to $4.835(Book value) - 8.24 Million (Market Cap) = -$3.41 Million
Now, since Part of the AmTrust revenues were shed in Q4, shedding the total 2015 net income in half is conservative since we'll be double counting part of the removal of AmTrust. 2015 Net Income of $1.677 million/2 = $838,500.
The company now trades at $3.41 million/$838,500 = 4.06x earnings. Now, I don't want to speculate on what revenues will be next quarter, I'll leave it to the real analysts to do that. I no longer use financial models, but you do not need excel to tell you that this thing is a steal, even at $10/share.
I'm moving the price target from $11.76 to $14/sh. This still makes up just over 5% of the portfolio. Let's hope for a stellar Q1!
Disclosure: I am/we are long PFHO.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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