The $182.5 million of fixed-rate and floating-rate net debt that Alico took to finance the acquisitions is reasonable. According to management, the weighted cost of debt is 3.5% and the duration is 15 years. Alico has plenty of interest coverage for the debt, with an EBITDA to interest expense of 6.9x. Management paid off $11.3 million of debt during its fiscal second quarter, giving the company a net debt of $229.2 million at the end of that quarter. So far, Alico’s adjusted EBITDA has not matched management’s expectations. For the fiscal second quarter, Alico reported an adjusted EBITDA of $15.7 million, an increase from 2014’s second quarter EBITDA of $10.7 million, but nowhere near the tripling that management expected. One reason for the lower than expected adjusted EBITDA was lower citrus prices, which fell 6.8% year-over-year.
Alico, Inc. (NASDAQ:ALCO) would be a good investment at $45 per share. At that price, Alico would trade at a P/FCF of 13.6, giving the company an owner’s earnings yield of 7.5%. Assuming that a citrus blight doesn’t destroy Alico’s harvest and that citrus prices keep up with inflation, shareholders would have an additional 3% annual return.