With an acquirer’s multiple of 4.8, Computer Task Group Inc. (NASDAQ:CTG) is the sixth cheapest stock in the Small and Micro Cap Screener. It’s an information technology (IT) solutions and staffing services company in North America and Europe. It has 3,900 employees. The company implements electronic health records; assists in the start-up and development of health information exchanges for health insurance companies; and offers transitional application management services, including outsourcing support of single or multiple applications, and help desk functions, as well as develops a proprietary software to support the healthcare provider market. Its IT and other staffing solutions include recruiting, retaining, and managing IT and other talent primarily for technology service providers and companies with multiple locations. The company also provides IT services for the healthcare provider market that include clinical systems integration and implementation, application management, technology support for medical imaging, training, and technical resources. It serves healthcare, technology service providers, financial services, and energy markets. The company was founded in 1966 and is headquartered in Buffalo, New York.
CTG is incredibly cheap, and doing something about it. It has a market cap of $118 million, an $84 million enterprise value and generates $17 million in operating earnings. It generates FCF/EV of 5 percent, which it uses to pay a 3.8 percent dividend and buyback stock–1.6 percent of its market cap over the last twelve months.
I love it when I agree with Shadowstock’s John DiStanislao because it means I’m on the right track:
Computer Task Group is a simple story trading at historically and sector relative cheap valuations. CTG is consistently profitable. TTM dividend yield is 3.20% and there’s an oversold (-51.30%) negative 52-week price change.
The table below compares the enterprise value to non-cash assets, gross profit, revenue, EBITDA and EBIT for the annual periods 2009 to TTM. Valuation discounts are significant across all line items of the financial statements. The current price trades at only 1.45 times annual gross profit and 7.90 EV/EBIT.
The table below shows the increase in per share value for revenue, GP, book value and dividends. These intrinsic value improvements contrast to the average per share market value declining over the same period. CTG trades at half the prior year’s market value.
CTG has a consistent diversified international revenue stream. The break down by region is 81.80% North America and 18.20% Europe. Multiple sectors are served – healthcare, financial services, energy and general markets. Revenue by vertical markets as a percentage of total revenue for the quarters ended April 3, 2015, are technology services providers 28.50%, healthcare 24.10%, financial services 7.00%, energy 5.60%, and general markets 34.80%. Further, a strong balance sheet with zero long-term debt and 2.23 per share in cash. Z score (5.90), M score (-2.56), and a sloan ratio (-.45) all indicate a safe financial operation.
According to Yahoo, insider ownership is 32.95%. But, reviewing the latest proxy there are 12 officers and directors that own 11.40%. Value investing institution Royce owns 12.50% along with other value shops, Heartland, Robeco, Minerva Advisors, Teton and others. Insider activity for 2015, directors acquired 26,555 shares for $231,815 at an average price of $8.72. The CEO received 67,000 shares. Note that the share count has remained stable from 2008, and the prior years had positive insider buying at higher prices.
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