TOP IDEAS: Profits are no longer lagging at The Caldwell Partners International Inc. (TSX: CWL)

The Caldwell Partners International's (TSX: CWL-$0.77) growth is now translating to profits and dividends for shareholders. For fiscal 2012, the Company reported after-tax net profit of $981,000 or about $0.06 in earnings per share and declared dividends. The charge to profitability was lead by Company's final two quarters, each earning big profits.

For two fiscal years prior, Caldwell Partners sported 112% revenue growth but showed little in profits. The cost of growth for which the Company earned the distinction of being the fastest-growing executive search firm in North America was largely front-end loaded due to high partner acquisition costs (over 20 new partners added). This expansion period transformed Caldwell Partners from a respected Canadian brand to an executive search company with a strong North American presence.

With much of the one-time acquisition and infrastructure costs to support its executive search consultancy operations in the United States complete, the Company is well-positioned to leverage US operations with more revenue growth. In a recent Globe and Mail Report on Business write-up on Caldwell Partners – Searching for the right stuff in executive hiring -- the Company's CEO John Wallace said he wants to continue with US expansion while maintaining a base in Canada, and hopes to see the firm reach $100 million in revenue, up from $33 million in 2012, which would expand profit margins significantly.

Fortunately Caldwell Partners is in a strong financial position to grow revenues with more partner acquisitions in 2013. The Company maintains a very strong balance sheet with $7.1 million of unencumbered cash (up from $5.6 million in 2011) and no debt, as of August 31, 2012.

We are very encouraged by Caldwell Partners' profitability in Q3 and Q4 of fiscal 2012, even though it is traditionally stronger then the Company's Q1 and Q2 results. Just two weeks ago, we initiated Caldwell Partners to the list of Investorfile's Top Ideas – small cap value stocks (See: Caldwell Partners International: US expansion pays "dividends” for small cap value investors). At that time we recommended there is tremendous value by accumulating stock of Caldwell Partners up to $1.30 per share while earning a dividend (currently yielding 7.8%). The Company's 2012 fiscal results further confirm our findings.

Caldwell Partners has only 16.9 million shares outstanding.

The Caldwell Partners International website: www.caldwellpartners.com

Author ownership disclosure: TSX: CWL - Long

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