[MFI #1] KSW Inc
KSW Inc [ticker: KSW] is a company that installs HVAC systems in buildings. If you spend a little bit of time looking at the chart you’ll notice the stock fell from a high of $8.5 to a low of $6.5 at the end of July, it has since recovered to around $7/share.
I will assume much of the sell-off has occurred because investors are panicing over the housing market bust. KSW rises and falls with commercial real estate investment.
Debt/Equity:
No debt on the books
Warnings:
One thing I’m concerned about is the fact that since June the CEO has been dumping stock. There have been 14 form 4’s filed since June 18th. All of the forms include sales. Maybe the CEO needs to pay rent or something, but the frequency and amount are concerning. On some days the insider selling amounts to 20% of the volume for the day. This is a big red flag for me.
Pros:
According to this press release the company has $90 million dollars in backlog.
2Q earnings were $.12/share vs $.10 same period last year
Cash of $2.77/sh
Cons:
As noted in the 10-K the company is considering pursuing an acquisition in either the same field, or a different line of business for diversification (diworsification most of the time).
This is a small cap stock (43 million market capitalization), this could result in large bid-ask spreads, or liquidity problems when purchasing or selling.
The $90 million backlog is based on contracts that have been signed that have contingency clauses and allow customers to back out. I don’t consider this a reliable number.
Dividend Policy:
There is currently a $1.96/sh dividend. Which at the current price of $6.90 works out to be a 27.8% dividend. I’m not sure how long this dividend can be sustained at this level.
Long Term Growth:
I think KSW has some nice long term growth prospects. Commercial real estate didn’t appreciate as much as residential real estate during the current boom. Also this type of business is very stable over the long term as long as the company is in a good financial position to weather the storm. I think KSW has enough cash to weather this housing boom if they cut their dividend and do not encounter any delays in their backlog.
Management:
I don’t really have any information on management except for the insider selling noted above.
Current Share Details:
Price: $6.90