I am always looking for some good investment ideas. Earlier this year I read the following stock pitch shared by MOI regarding KVH Industries, Inc. (NASDAQ:KVHI):
KVH Industries (US: KVHI) provides communications services and content for the maritime industry, with an extra bonus of supplying a key part of the navigation system for self-driving cars. The company’s AgilePlan Connectivity-as-a-Service offering, could serve 50,000 vessels up from 1,500 today with $25 million of revenue in 2020. KVH Watch, an IoT solution for remote monitoring by maritime equipment manufacturers could be as large an opportunity as AgilePlans. KVH’s new photonic-integrated chip fiber-optic gyroscope (FOG) for self-driving cars, could be a multi-hundred million dollar opportunity. KVH’s TACNAV could be part of the Army’s A-PNT (assured positioning and navigation) program with a $150-750 million multi-year opportunity. At $250 million of revenue, KVH could earn $1.50-$2.00 per share. Risk exists with regard to new products and their effect on revenue and earnings.
At $11.25 per share, KVHI has a market cap of $200 million, $55 million of cash and $160 million of revenue. Even without the growth opportunities, KVH could be valued at $13-14 per share based on 1.1x enterprise value/ revenue. Downside protection could come from a recently enacted one million share buyback. Additionally, Vintage Capital, has a 9.4% stake in KVH. Should the company fail to execute, Vintage might push for structural change or a sale.
This write-up was provided by John Barr of Needham Funds. I like that KVH Industries carries a large amount of cash on its balance sheet. It serves container shipping companies which are negatively affected by the coronavirus crisis, but it isn’t like the other corporations begging for a taxpayer bailout. The stock currently trades at $9.18. Unfortunately, this isn’t a big discount to its pre-crisis price. I can buy Alphabet Inc. (NASDAQ:GOOG) for the same amount of discount. That’s why I am not going to spend 3-4 days analyzing KVHI at this point. John Barr might be right about KVHI’s huge growth potential. However, the company seems to have some corporate governance issues and may not be a good investment candidate unless activist Vintage Capital gets involved (though it may be too late to buy the stock by that time).
I won’t be gambling with KVHI, but leave a comment if you decide to take a deep dive.
Disclosure: None. This article is originally published at Insider Monkey.