Super Stock Picker Forum

Is it just me or is Goodfellow really cheap?  Not sure how many of the participants in this board are traditional value investors, but this company has generated a boatload of cash over the past several years, has a great balance sheet, and yet is trading at a rock bottom price.  Check out this blog for more details:  http://canadianbengraham.blogspot.com/

Hi Tara

Thanks for taking the time to share with me the good advice.  Of course it would make sense to provide some numbers, so here goes:

Year end is August so fiscal 2009 numbers are TTM
Current price: ~ $10 (thinly traded so it jumps around a bit)
Market Cap:  $90 million
Working capital:  $79 million, with the bulk of the current assets in receivables and inventory (the company carries very little cash)
Long term debt:  Currently none.  There is $5.4 million in current bank debt
Goodwill & Intangibles:  None.  There is a long-term deferred pension asset of $4.7 million
Shares outstanding basic & diluted:  8.6 million (basic & diluted are the same).
Book value per share:  $12.97
Gross margin: 2009 – 18.9%; 2008 – 18.6%.  Note that this comes from p 6 of the annual report; the income statement does not break out COGS, but lumps in with SG&A
Free cash flow:  defined as CFO less Capex, it was $19.7 million in fiscal ’09 ($2.30 per share) and $19.0 million in fiscal ’08 ($2.21 per share).  The three prior years were all positive, averaging $11 million per year. 
Earnings per share:  87 cents in fiscal ’09 before an extraordinary gain of 39 cents relating to an expropriation agreement; 83 cents in fiscal 2008.  As far as a forecast goes, I don’t have one.  But the company has been consistently profitable and management was cautiously optimistic in the outlook section of the most recent annual.  They state:  “we have seen many firms depart the scene particularly in the core lumber sectors” and “the Company remains a favored customer due to our strong financial position.  This has resulted in good opportunities on both the supply and customer side.”   
Lawsuits:  to the best of my knowledge, none.
Insider ownership:  The Goodfellow family owns 48% of the outstanding shares.  Stephen Jarislowsky, the legendary Canadian value investor, owns 12% and is chairman of the board.
Latest insider trading:  none significant.  Based on a comparison of the past two management proxies

To be sure, this isn’t a glamorous growth stock.  But it is a stable business with solid cashflow, great management and a very good balance sheet.  With a tangible book value of nearly $13 against a share price of $10, and average EPS over the past 7 years of $1.20, it certainly represents good value.

Thank you for your very kind words Tara, although I'm somewhat humbled by your analysis.  Clearly I still have a lot to learn and I sincerely appreciate you taking the time to offer your very in-depth analysis.  Perhaps I'm too focused on the numbers alone and sometimes miss the bigger picture, in this case that the recent past may not be a great predictor of the near future, given the different economic environment.

Still, economic forecasting is notoriously difficult.  I think the surprises are just as likely to be on the upside as they are on the down, and with the share price so low on Goodfellow, I think any upside gains would be larger than the downside losses. While ultimately an investment in Goodfellow may not generate market-beating returns, over the long run, investing in many companies like Goodfellow, will.

And thanks for the heads up on Jite and Xentel.  I read your write-ups on both.  Very interesting....I will definitely be looking at these in more detail.

Have a great one!