Another early Oddball Stocks post was Ingram Micro in September 2011. (In addition to the Oddball blog writeup, it was also presented at the Value Investing Congress in 2011.)
This is another boring business - not consumer facing and not a "compounder" - but let's see how it did over time. First, here was Nate's thesis on the blog back in 2011:
ValuationWhat ended up happening is that in February 2016, Ingram Micro announced that it would be acquired by a Chinese company for $38.90 per share, cash. The deal ultimately closed in December of that year. Counting a couple of small dividends that were received in 2015, that was a compounded IRR of 16.3%.
Here are a few quick valuation stats:
-P/E of 9.69
-EV/EBIT 3.08
-EV/FCF 5.52
So on a few simple metrics the company is coming up cheap. What might be an appropriate valuation for Ingram Micro? The industry average P/E is 10.5, which if IM traded at that level they would be at $19.11, not much upside.
A P/E of 10.5 plus cash results in a price of $27.75 per share.
If the company traded at an EV/EBIT of 8 the price would be $32.34 which is quite a bit higher than $17.66.
Conclusion
Ingram Micro is trading at a very cheap discount to net assets, and the business is trading cheaply as well. Even with both of those factors I don't have a good feeling about Ingram Micro. The company has a decent amount of debt and operating leases, and earnings are extremely lumpy. I also don't know how much valuation expansion exists. Clearly the company is cheap, but how much cheaper than peers. And for an industry that has bad margins maybe a P/E of 10 is warranted. If the market values based on P/E they are already close to full value. This is going into my consider further, and re-consider if it drops bin.
It is often hard to find charts of stocks that have stopped trading, but Barchart.com has one for IM up until it was acquired.
I love these follow ups
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