TOP IDEAS: Caldwell Partners International (TSX: CWL) revenues jump 37% as partner acquisitions began to add up. It is time for small cap investors to take notice.

Most small cap investors do not know it yet, but Caldwell Partners International Inc. (TSX: CWL - $0.96) has become an acquisition growth story. Maybe they should pay more attention to start sharing in the gains.

Caldwell Partners International is a North American executive search firm whose focus is on the high end of the employment search market; for CEOs, CFOs, presidents, boards of directors and senior level positions where an executive search is seen as an important business investment rather than an expense. With offices across North America and strategic presences in Hong Kong and London, Caldwell Partners' executive search expertise serves a multiple of major industries including Financial Services, Technology, Industrial, Healthcare, Consumer, Media and Government.

Ranked among the Top 10 executive search firms (by Executive Search Review) in North America, the Caldwell Partners’ brand is very strong, which is attracting high-calibre search professionals to join the Company. Over the last 12 months, Caldwell has acquired six new senior partners in the USA and Canada to be part of its executive search team.

At Caldwell, each partner it adds to the team is expected to generate on average $1.25 million in executive search fees annually. The Company now has 33 partners and a projected annual revenue run rate of over $40 million.

Caldwell’s growth from the recent partner acquisitions is already evident. The Company just reported last week that first-half revenues in fiscal 2014 grew 37% to $19.5 million. It should be noted that historically Caldwell’s second half revenues are usually higher than the first half, suggesting that there is more revenue growth to come later this fiscal year.

With higher revenues, expect higher profits. Caldwell’s management has said profits margins will expand more notably when annual revenues exceed $40 million. The Company reported $0.024 per share in earnings for the first half of fiscal 2014.

Caldwell Partners has become an acquisition growth story. Each executive search partner it acquires adds more than $1 million to the Company’s top line. By adding a multiple of partners each year this Company is on a pathway for big growth in revenues and now profits too.

To fund the growth, Caldwell Partners maintains a very strong balance sheet with over $10 million in unencumbered cash on hand and no debt.

In our last blog post (See: For Caldwell Partners International: 2014 could be a breakout year for profits and stock price) we were bullish on Company’s fiscal 2014 outlook. Given the Company’s 6-months financial results we still are.

The stock price is up 30% since we first recommended the shares of Caldwell Partners as one of our Top Ideas about 17 months ago. (See: Caldwell Partners International: US expansion pays "dividends” for small cap value investors) The total return to date is 49% if you include the dividends the Company has paid to its shareholders during this period.

But we think there is still a lot of upside potential and continue to recommend that small cap value investors should accumulate Caldwell’s stock up to a price of $1.30 per share. If the Company continues to expand its partner base, the stock should exceed our accumulation target price.

The Company currently pays a quarterly dividend of $0.0175 per share, a current yield of 7.45%

Caldwell Partners has approximately 21 million shares outstanding.

The Caldwell Partners International website: www.caldwellpartners.com

Author ownership disclosure: TSX: CWL - YES

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