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This 11 O'Clock Stock pick is a little different. Rather than profile another Motley Fool analyst's recommendation, for today's buying opportunity we turned to the 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community. And we found a classic value play that is not only one of the community's favorite recommendations from Motley Fool Stock Advisor, but it is also a favorite of two of our top-rated and most respected community members: TMF1000 and UltraLong.

Mobile Mini (Nasdaq: MINI) provides portable offices and storage solutions in North America, the United Kingdom, and the Netherlands. It operates in a number of markets, including commercial construction, established business, and individual consumer segments. Over the past decade, Mobile Mini has benefited from numerous trends:  Simply put, we own more stuff; we move and remodel; there was a boom in residential and commercial construction. Of course, as you might imagine, the construction industry downturn has taken its toll on Mobile Mini's profits, but that's part of what makes it appealing as an investment right now. In short, our CAPS community sees this as a great business with enduring assets in the midst of a market downturn when its market segment is particularly out of favor.

Fast facts on Mobile Mini

Market Capitalization

$555 million


Commercial Services and Supplies

Revenue (TTM)

$331.8 million


$21.3 million


Local companies, McGrath Rentcorp (Nasdaq: MGRC), Williams Scotsman

Source: Capital IQ, a division of Standard & Poor's. TTM = trailing 12 months.

Staying optimistic
In his recent profile on the company, UltraLong argues that Mobile Mini's performance has been pretty impressive during the worst commercial building downturn in half a century:

Have profit forecasts disappointed over the past two years? Absolutely, but considering that a lot of their business is dependent on the construction sector and consumer retailers, and they backed off considerably on their orders during this time span, it's not exactly a surprise. What continued to amaze me despite the 2008-2009 recession was just how resilient MINI was. They continued to produce a profit and grow shareholder value in the face of the worst construction downturn in well over 70 years. Historically speaking EBIDTA runs around 38% to 42% of revenue and has remained consistent.

Moreover, the company has recently shown signs of reigniting growth in the business. TMF1000 highlights strong earnings over the past two quarters in his review of Mobile Mini's recent shareholder meeting in August:

Revenues fell 13.8% from last year, but they grew 6.4% from the first quarter... This represented the first sequential growth since the third quarter of 2008. Hopefully it will be one of many. The company tends to go up and down with the economy, so a double dip recession would hurt them. Bottom line, they have a great business in my opinion. If one believes the economy is coming out of the recession, MINI should participate.

Hmm -- so are we going to double-dip, or is the economy slowly on the mend? According to a report this month by S&P Chief Economist David Wyss, spending on U.S. commercial property construction will likely drop 14% this year. By 2011, he expects construction to stabilize, and growth to resume in commercial construction spending in 2012.

Reasons to believe
Our star CAPS analysts find plenty of reasons to like Mobile Mini even in the midst of this uncertainty in the construction market.

UltraLong: MINI is currently trading marginally over its book value and around 15 times 2011's profit projections. It has a long-term growth rate closer to 12% which places this at a very reasonable price to earnings growth ratio of 1.20. I have long felt that MINI was either going to become a takeover candidate or it was going to become the big dog in its field. They are far too well run and way too profitable to continue to mull in the doldrums of just 1.05 times book value. I would be willing to place a target price on MINI of $26 per share which should easily support the underlying fundamentals.

TMF1000: The Company also entered three new markets in the second quarter – Omaha, DC, Norfolk/Virginia Beach. They presently have 101 locations and have identified more than 50 potential new markets in North America. They are also the leader in the UK. They have 18 branch offices there and 2 operational yards. They plan to enter new markets slowly. They also are going to focus on paying down debt. This is why they are managing their fleet sales and capital expenditures. If we back out the fleet purchases, the company produces extremely large streams of cash that could pay investors a large dividend.

Also, many investors overlook that about 69% of Mobile Mini's business is to nonconstruction businesses, making it more insulated from the construction downturn than many investors believe. And one of the most intriguing aspects of its business is the enduring value of its storage fleet asset. A storage container pays for itself in about three years and has a useful life of 30-50 years. And Mobile Mini can sell a container after 20 years for about the same price as it bought it in the first place!

The risks
Mobile Mini's debt looks downright scary to many investors. It has nearly $800 million in debt, and many fear that any protracted and severe pullback in construction and consumer spending habits could spiral it into a black hole of debt restructuring. Nevertheless, our CAPS community isn't too concerned:

TMF1000: Their debt looks scary to many investors who don't understand the value of their fleet. So if they can pay it down to less scary levels, I think investors will pile into the stock. They paid down debt by $[22] million in the quarter and $[$86] million since last year. At that rate they will have it paid off in 10 years – Ouch! But they don't have to pay it all off, just down. We want to see the Net asset value to go up. Presently it is $5.74 per share. They raised that by about $1.00 since last year ... And Mobile Mini regularly sells non-core fleet assets. They produced $20.19 million in cash flow in the second quarter including the purchase of new fleet assets and other capital expenditures.  If sales are stabilizing, this should help them pay down debt faster and that will help the stock price.

The final word
As Mobile Mini pays down debt and raises net asset value, the share price should go up. As the economy improves, the company's business should improve. Management has consistently increased shareholder value over the past 10 years -- in good times and bad -- and that, along with the uniquely profitable storage unit asset, limits the risk in buying shares at current levels. While debt is high, the value of its assets is higher. And if Mobile Mini does grow successfully into those 50 new markets, it should make investors who saw today as a buying opportunity very happy.  

Interested in reading more about Mobile Mini? Add it to My Watchlist, which will find all of our Foolish analysis on this stock.

Previous recommendations (Click here for full list of recommendations and performance):

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John Keeling owns shares of no companies listed above. Mobile Mini is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.