AVX Corporation (NYSE:AVX) is another unusually cheap stock in the All Investable Screener. At $13.36, it has a market capitalization of $2.2 billion, and with net cash of $844 million, an enterprise value of $1.4 billion. It generated operating earnings over the last twelve months $212 million, putting it on an acquirer’s multiple of 6.6x. It has a PE of 9.5, and generated a free cash flow / enterprise value yield of 7 percent over the last twelve months. AVX is controlled by its Japanese parent, Kyocera Corporation of Japan, which owns 72 percent of its stock, so it’s not a potential activist or takeover target, it’s just cheap, and safe.
AVX is a manufacturer of a broad line of “passive electronic components” used to store, filter or regulate electric energy. The company’s products include ceramic and tantalum capacitors, film capacitors, varistors, filters and other components manufactured in its facilities throughout the world, and by Kyocera. It operates in three segments: Passive Components, Kyocera Electronic Devices (KED Resale) and Interconnect.
Our statistical tools indicate that AVX is a safe stock, with no indication of earnings manipulation, fraud, or financial distress. AVX has an Piotroski F-Score of 6/9, which is a solid score. It falls down in three areas: quality of earnings (it generated $198 million cash flow from operations against $226 million in net income, but is still generating healthy cash flow), working capital liquidity (its current ratio deteriorated from 10.9x, to 6.5x, but remains very good), and it issued a small amount of stock (increasing outstanding shares from 168.4 million to 168.5 million, an immaterial number, which, when we update with the most recent results, will reverse to net buyback). It has a Altman Z-Score of 6.6, which indicates it is in the safe zone and far from financially distressed, and its Beneish M-Score is -2.7, which indicates it is not an earnings manipulator (anything less than -2.22 is a good score). It’s a safe stock.
The cold, dead hand on AVX’s stock price is its Japanese parent. There’s no potential for activism other than through public embarrassment, but it’s conservatively managed, so there’s be little to complain about other than the huge pile of cash on the balance sheet. Management might reasonably argue that it’s a cyclical business so some cash buffer is required, but nigh on $1 billion seems too conservative to me. There’s always the possibility that Kyocera decides to spin it off or sell it to management and a private equity firm, but if or when that might happen is unknowable. Its Q1 results, which, a little confusingly, ended on June 30, are good. They show cash, and cash equivalents etc of $936 million and no debt. The company paid a minuscule $17.6 million in dividends to achieve its solid 3.1 percent dividend yield. What is interesting is that its dividend yield is as high as it has ever been, and it has tended to go on a run from here. In late October 2012 it traded at approximately the same level and ran from $9.45 to as high as $14.5 earlier this year. Encouragingly, the company has also used $3.4 million to repurchase shares in the open market. It’s not much, but it’s better than net issuance. AVX has been an buying back stock consistently for the last 10 years, likely to cement Kyocera’s control. Even so, the little ongoing buyback, combined with a easily covered, fat dividend yield at historical heights, makes this a cheap, safe stock that could run 50 percent or so.
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