One of the cheapest stocks in our Small & Micro Cap Stock Screener is Finjan Holdings, Inc (NASDAQ:FNJN).
Finjan Holdings, Inc., (Finjan) through its subsidiaries, operates as a cybersecurity company, provides intellectual property licensing and enforcement services. The company owns a portfolio of patents related to software and hardware technologies that proactively detect malicious code and thereby protects end users from identity and data theft, spyware, malware, phishing, trojans, and other Web and network threats. Its patented technologies are used in specific cybersecurity technology areas, including endpoint/cloud software, Web gateway/Internet infrastructure, networking equipment markets, and mobile security. The companys technology scans and repels the latest and unknown threats to network, Web, and endpoint devices on a real-time basis. It also provides investments in cybersecurity technologies and intellectual property; offers cyber risk and cyber security advisory services; and develops mobile security applications.
A quick look at Finjan’s share price history over the past twelve months shows that the price is up 78%, but here’s why the company still remains undervalued.
The following data is from the company’s latest financial statements, dated March 2017.
The company’s latest balance sheet shows that Finjan has $26 Million in total cash and cash equivalents. Further down the balance sheet we can see that the company has zero debt. Therefore, Finjan has a net cash position of $26 Million (cash minus debt).
In addition to the company’s strong balance sheet, all financial strength indicators show that Finjan remains financially sound with a Piotroski F-Score of 7, an Altman Z-Score of 7.77, and a Beneish M-Score of -1.07.
If we consider that Finjan currently has a market cap of $78 Million, when we add the preferred shares totaling $6 Million and subtract the cash totaling $26 Million that equates to an Enterprise Value of $58 Million.
If we move over to the company’s latest income statements we can see that Finjan has $18 Million in trailing twelve month operating earnings which means that the company is currently trading on an Acquirer’s Multiple of 3.22, or 3.22 times operating earnings. That places Finjan squarely in undervalued territory.
The Acquirer’s Multiple is defined as:
Enterprise Value/Operating Earnings*
*We make adjustments to operating earnings by constructing an operating earnings figure from the top of the income statement down, where EBIT and EBITDA are constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–income that a company does not expect to recur in future years–ensures that these earnings are related only to operations.
It’s also important to note that if we take a look at the company’s latest cash flow statements we can see that Finjan generated trailing twelve month operating cash flow of $22 Million and had $0 Million in Capex. That equates to $22 Million in trailing twelve month free cash flow, or a FCF/EV Yield of 38%.
Something else that seems to be overlooked is that Finjan’s currently has historically high revenues of $41 Million (ttm) and net profits of $17 Million (ttm). Other historical highs include EPS of $0.46 (ttm) and book value per share of $0.46 (ttm). The company currently holds 33% of its $78 Million market cap in cash and has a net current asset value of $8 Million when you subtract its total liabilities of $13 Million and preferred stock of $6 Million from its current assets totaling $27 Million.
In terms of its present valuation, Finjan is currently trading on a P/E of 7.4, or an earnings yield of 14%, a FCF/EV Yield of 38% (ttm), and an Acquirer’s Multiple of 3.22, or 3.22 times operating earnings. The company also has $26 Million in cash and zero debt. All of which indicates that Finjan is currently undervalued.
About The Small & Micro Cap Stock Screener (CAGR 22%)
Over a full sixteen-and-a-half year period from January 2, 1999 to July 26, 2016., the Small & Micro Cap stock screener generated a total return of 3,284 percent, or a compound growth rate (CAGR) of 22.0 percent per year. This compared favorably with the Russell 3000 TR, which returned a cumulative total of 265 percent, or 5.7 percent compound.
For more articles like this, check out our recent articles here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple: