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Jan
15
Caldwell Partners International is delivering on more profits and paying dividends
Posted by: Gerry Wimmer
1/15/2017
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TOP IDEAS: With a new cost structure in place, Caldwell Partners International (TSX: CWL) can grow revenues to build profits while paying shareholders a handsome dividend. Fiscal 2017 is off to a good start.




Investorfile's share price accumulation target of $1.30 for Caldwell Partners International Inc. was reached on July 18, 2014. For the record, we do not revise share price targets for our Investorfile Top Ideas - Small Cap Value Stocks. We have positioned our blog to be one of the first providers of a pragmatic perspective of a small cap company stock's potential worth, where there may be uncovered value that has been largely overlooked by the investment community.


What a difference a year can make: Caldwell Partners International Inc. (TSX: CWL - $1.20) posted earnings of $0.038 per share in Q1 of fiscal 2017 compared to losing $0.008 per share in Q1 of last year.

Caldwell Partners International is a premier 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. Caldwell Partners' executive search expertise extends from offices in Canada, USA and the UK with affiliates throughout Latin American and New Zealand serving a multiple of major industries, including Financial Services, Technology, Industrial, Insurance, Healthcare, Consumer, Media and Government.

Caldwell Partners’ revenues are primarily generated from executive search fees that it shares with its partners in addition to royalty fees earned from its affiliates.

No doubt, fiscal 2016 was a challenging year for Caldwell Partners. Despite having annual revenues of $57.6 million, profits were down. The Company said that last year the falling oil prices in Canada dampened economic activity, resulting in declining search volumes which impacted its results. Also in the USA and UK, the Company admitted that staffing and office expenses were not properly aligned to executive search volumes, which had a profound impact on profits last year. Due to the lower profits, the Company’s stock price was down.

As a result, in the latter part of fiscal 2016, the Company’s Management initiated a cost reduction plan and changed its partners’ and management’s compensation cost structure to better position Caldwell Partners to grow profits annually while paying its shareholders a sustainable dividend. Q1 in fiscal 2017 has already shown improved profitability. But Management believes the second half of fiscal 2017 will be more reflective of stronger profit growth (over the prior year), the period when revenues are traditionally higher.

Going forward, revenue growth still remains a priority but at measured pace says the Company in its Q1 report. This is to ensure long-term profitability and continuation of regular dividend payouts. Caldwell Partners’ board recently declared its 20th consecutive quarterly dividend payment.

Caldwell Partners says it expects future revenue growth will be driven by targeted executive search partner hires. Also, revenues from royalties will increase. Royalty percentages earned by the Company from its international affiliates are already negotiated to double, beginning in fiscal 2018. Caldwell’s Management has said that it will also consider accretive acquisition opportunities. The Company has a strong balance sheet.

Despite that, Caldwell Partners’ stock had previously surpassed our target price but has retreated since, the return to date on this investment -- if you include all dividend payments -- is still about 180% since we first recommended the Company’s shares as one of Investorfile’s Top Ideas (See: Caldwell Partners International: US expansion pays "dividends” for small cap value investors.)

Today we continue to like the stock. Therefore, the Investorfile blog reaffirms its recommendation that for small cap investors, Caldwell Partners’ stock is a value investment opportunity up to a target price of C$1.30 per share. At $1.30 the shares still earn a dividend yield of over 6%. We expect that the share price will exceed our target again as profits grow.

Recently the Investorfile blog featured Caldwell Partners International in its annual predictions as our Top Ideas stock which could see profits rebounding in 2017. (See: Investorfile predictions for 2016 perform well. Looking forward to 2017– Prediction #1.) So far, this prediction is right on track.

Caldwell Partners has approximately 20.1 million shares outstanding.

The Caldwell Partners International website: www.caldwellpartners.com

Author ownership disclosure: TSX: CWL - YES


Read Disclaimer:

This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

Investorfile.com is not engaged in an investor relations agreement with The Caldwell Partners International Inc. nor has it received any compensation from The Caldwell Partners International Inc. for the preparation or distribution of this article.

The author of this article has acquired and may trade shares of The Caldwell Partners International Inc. through open market transactions and for investment purposes only.

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.