TOP IDEAS: Caldwell Partners International (TSX: CWL)
has posted another record year with revenues of C$72 million, and the stock
price still needs to catch up.
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.
It has been seven years since the Investorfile blog
first recommended to small cap value investors the investment idea to purchase
stock in Caldwell Partners International Inc. At that time the stock was
trading at C$0.74 per share. (See: Caldwell
Partners International: US expansion pays "dividends” for small cap value
investors). Since that blog post, shareholders of the Company have
been paid back C$0.5425 per share in dividends, which implies a net cost base
of only C$0.1975 per share on the original investment. Today the stock trades
at a share price C$1.29, which amounts to a total gain (from the net cost base)
of about 553% for investors who continue to hold the stock. To date, owning
stock in Caldwell Partners International has been a good small cap investment.
That said we believe the biggest
investment gains from owning this stock are still to come.
Caldwell Partners International Inc. (TSX:
CWL - $1.29) 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 in Australia 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
Fiscal 2019 has turned out to be another
record-breaking year for revenues. With the aid of a strong Q4, whereby
Caldwell Partners set an all-time record for quarterly revenue at C$21 million,
total revenue this past fiscal year amounted to C$72.1 million. The revenue
growth momentum for Caldwell Partners should continue into fiscal 2020 too,
according to Management comments. The Q1 report for fiscal 2020 should be
released early in the New Year.
The Company has more doubled in size since
Investorfile began its coverage of Caldwell Partners. At that time, the
revenues base was about C$33 million. Over the years, the Company targeted four
to five executive search partner hires per year to grow. Each additional
partner can add $1- 2 million in revenues annually. Currently Caldwell has about 40 partners.
While the revenue growth for the Company has been
consistent, it has gone under the radar by gaining little recognition from the
investment community. But we feel that there maybe a new mandate by Caldwell’s
Board of Directors to better utilize the capital markets and grow the Company
faster by making strategic acquisitions. As such, Caldwell has several new board members: Elias
Vamvakas (Chairman), John Young and Darcy Morris, all of whom have extensive
capital markets and acquisition experience. Collectively, the members of
Caldwell Partners' Board of Directors now own or control over 20% of the
Company’s outstanding shares.
There is no doubt that the stock price has
not keep pace with the Company’s growth. Today Caldwell Partners’ shares trade
at market valuation equal only to 35% of its annual revenues, despite the
Company being profitable and debt-free.
Investorfile is of the opinion that there
is a strong incentive from the new board leadership to unlock shareholder value
in Caldwell Partners. By what means they achieve this we will wait and see.
Fair value for a profitable executive search firm is close to one-time annual
revenues, which implies a very significant premium to the Company’s current
For small cap investors who want to catch
the stock’s upside potential, they can purchase shares today and earn a 7%
dividend. In the past, owning stock in Caldwell Partners has produced very good
returns. But for the future, we think owning stock in Caldwell Partners may turn
out to become a great investment.
The Company has approximately 20.4 million
The Caldwell Partners International
Author ownership disclosure: TSX: CWL - YES
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.