For those thinking this is a no-brainer business, you need to take a moment and read fellow Fool contributor Rich Smith's assessment of the company's latest earnings. He calls it the financial equivalent of a 12-car pileup because the company is free cash flow negative and, even after selling assets, still reported a 36% drop in profits from continuing operations.
Today, the company retainedMorgan Stanley
It doesn't take Dick Tracy, after looking at a snapshot of the company's performance, to see why Wall Street is ignoring this stock. Why chase these anemic results (3.1% revenue growth, a return on equity of 3%, and 2% profit margins)? Oh, and the net debt (total debt minus cash) stands at a not-so-small $261 million (22% of revenue).
More telling, at least to me, is that the number of facilities the company operates at the end of every fiscal year has declined in every category (managed, leased, or owned), in every year, for the past three years. In a fragmented business, shouldn't the biggest company be growing the number of facilities in its empire?
Maybe this is another Kmart
As of Sept. 30, the company owned 192 parking facilities either independently or through joint ownership. Seventeen percent of the properties were structures; the rest were surface lots. All but three are inside the United States. But in the company's annual filing with the Securities and Exchange Commission, there is no mention of vast hidden real estate wealth.
Last fiscal year, the company sold 14 properties for $50.1 million (an average of $3.6 million per facility) for an above-book-value gain of $14.2 million. That gain, which equates to 40% over book value, indicates that the company had some hidden real estate value. But what else is in that neighborhood -- 33.3% -- above book value? That's right: the stock price. True, a year's worth of property sales aren't necessarily indicative of the company's entire holdings, but there's a good chance the real estate market values are at least largely built into the stock price.
Still, investors liked today's news and sent the stock up 15% -- although it remains closer to its 52-week low than its high. The company would better serve investors by trying to get back to the operating levels of 2000, where profit margins and return on equity were twice today's results.
For investors looking to make a parking-industry investment, Standard Parking