FBRC: One Of The Cheapest Stocks I’ve Seen Is Breaking Out
FBR & Co. (FBRC) is a small-cap stock I’ve been recommending since late August ‘13. After consolidating into a range between $25.50 and $27 for the last several months, the stock has broken out in the past couple of sessions:
I’ve written about FBR a little bit here, but there have been a few developments recently.
During the first three quarters of their current fiscal year, FBR has generated a little over $90 million in net income. Management decided to use $29.6 million in NOL carry-forwards, so netting out that non-recurring boost FBR has done roughly $50 million, or $4.73 per share (based on 10.59 million shares outstanding, a calculation I’ll explain later in this post).
FBR did $.74 per share in Q4 ‘12, and that was with weaker business activity and 12.22 million shares outstanding. Even so, assuming that the bank replicates its results from last year, FY13 EPS will come in around $5.50. At Monday’s closing price of $28.31, FBRC is trading at a paltry 5.14x ‘13 EPS.
A look at the balance sheet however shows $200 million in cash versus no debt. That’s nearly $19 per share, giving us an ex-cash share price of $9.31, and an ex-cash FY13 multiple of 1.69x.
As for my calculation of outstanding shares, the most recent 10-Q (Q3) showed 11.33 million shares. On November 26th, the company disclosed that is buying back a block of nearly 737,000 (at $25.75) shares from some large owners. Thus, my calculation of 10.59 million. With such an enormous cash position and the context of management’s relentless buyback program since 2010, it’s plausible that even fewer shares are outstanding by year-end.
A meaty dividend, more repurchases, acquisitions etc. are all likely for FBR. Ultimately, I see management taking itself private or the company itself getting acquired at a big premium to Monday’s closing price.