TOP IDEAS: Caldwell Partners International (TSX: CWL) is posting a record year which could lead to a dividend increase and takeover upside. To date, owning the stock has returned 281% as a small cap investment.

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.

There have been naysayers over the years that are against buying shares in Caldwell Partners. But the fact is, since this blog 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), the stock has returned to date 281% through a combined steady flow of dividend payouts and capital appreciation.

We say the return on this small cap investment will continue to grow.

Caldwell Partners International Inc. (TSX: CWL - $1.18) 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 the firm, in addition to licence fees as a percentage of revenues earned from its affiliates.

Fiscal 2018 is turning out to be a banner year. The outstanding third quarter results for Caldwell Partners set an all-time record for quarterly revenue at $18 million, which led to net income of $987,000 and $0.05 per share in earnings. For the first nine months of fiscal 2018, the Company reported revenues of $47.8 million and net income of $1.7 million, which is up significantly from last year. The business momentum for Caldwell Partners should continue into its fourth quarter, according to Management comments, which should lead to exceptional annual results for fiscal 2018 when reported later this year.

No doubt, the Company’s current operations are very strong. This is the result of a number of factors. First,revenue growth has been driven by targeted executive search partner hires over the past two years. Search volumes and average search fees per partner have risen. Second, Caldwell’s US operations (which make up two-thirds of its business) are benefiting from the tailwinds of a robust US economy. Third, after several years of investment, the Company’s UK office is no longer losing money and is now positioned to contribute to Caldwell’s profitability.

The Investorfile blog continues its long-standing recommendation that, for small cap investors, Caldwell Partners’ stock is a value-wise investment opportunity up to a target price of C$1.30 per share. At the current trading range, and by most metrics, this stock is still very cheap. Based on what we expect for the upcoming fiscal Q4 and annual results, the shares today trade only at about 10 times earnings and less than five times Enterprise Value (EV) to EBITDA.

The stock also pays a generous $0.02 per quarter dividend, which currently yields about 6.8%. We are going on record and predicting that Caldwell Partners’ Board of Directors will raise its quarterly dividend payout later this year. This could be a catalyst for a higher stock price.

In the future, the possibility of a takeover or going private transaction for this Company does exist. Fair value for a profitable executive search firm is about one-time annual revenues. Based on current revenues this implies a valuation metric in the range of $3.00 per share which is a very significant premium to the current stock price.

Of note, Darcy Morris, founder and CEO of Ewing Morris & Co. Investment Partners, has joined the board of Caldwell Partners. Ewing Morris, a Toronto-based investment manager, recently acquired over 2 million shares of Caldwell stock (at about $1.20 per share) and now owns close to 10% of the Company for its managed funds.

Caldwell Partners maintains a very strong balance sheet. With unencumbered cash holdings of about $8.65 million and no debt, the Company has the financial capacity to make an acquisition or expand otherwise.

The Company has approximately 20.4 million shares outstanding.

The Caldwell Partners International website: www.caldwellpartners.com

Author ownership disclosure: TSX: CWL - YES

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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.

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