Royce & Associates recently filed a 13G which discloses that it owns 3.8 million shares of Brady Corp (NYSE:BRC), up from 3.5 million shares roughly three months ago. The new position represents a little over 8% of the outstanding shares. Brady is a $1.8 billion market cap company which primarily provides identification and security software; it also operates direct marketing and precision die-cut products businesses. Royce, which is managed by Chuck Royce, likes to take relatively large stakes in small-cap and mid-cap companies and has been managing money for 40 years. Find more of Royce's stock picks.
Brady’s fiscal year ends in July, and so its most recent quarterly report was for the first fiscal quarter (which ended in October). Revenue declined 3%, with slight increases in Asia-Pacific being offset by declines in the Americas (the largest segment at 44% of revenue) and EMEA. With the company also taking a small loss on the sale of certain businesses, earnings were down 17%; we estimate that if it were not for the loss pretax income would have fallen a more modest 6%.
If we annualize the 51 cents per share that Brady Corp earned, we get a P/E multiple of 17 at current prices; that’s a bit higher to what we get from analyst expectations, as consensus is for EPS of $2.27 in the fiscal year ending in July 2013. Looking out one year further, the forward P/E slips to 14. So the Street is expecting at least some earnings growth over the next couple years. That’s certainly not the trajectory the company is on, and Brady will have to improve even over the next few quarters to hit earnings targets for the current year.
Royce had the largest position in Brady Corp out of all the funds and notable investors we track in our database of 13F filings. Ariel Investments, which is managed by John Rogers, reported owning 2 million shares at the end of September, roughly unchanged from three months earlier (see Ariel's favorite stocks). David Dreman’s Dreman Value Management initiated a position of a little over 500,000 shares (check out more stocks Dreman was buying).