Hidden Value Stocks concern for the fourth quarter ended December 31, 2021, featuring an interview with Lowell Capital Value Partners Jim Zimmerman and Abigail Zimmerman. Jim and Abigail discuss their stock idea, Computer Task Group, Inc. (NASDAQ: CTG).
Possession Growth And Specialist Strategies Are Hedge Fund Trends For 2022According to the global, acclaimed hedge fund consulting and marketing company Agecroft Partners, the hedge fund industry will continue to grow in 2022 as the sector develops on its successes over the past two years. Q3 2021 hedge fund letters, conferences and more Every year the consulting firm publishes its forecasts for the biggest patterns Read MoreStock Idea One: Computer Task Group (CTG).
The Company also supplies IT and other staffing services, including managed staffing, staff enhancement, and volume staffing services. CTG serves the financial services, healthcare, manufacturing, and energy industries, as well as technology service companies.
CTG has actually slowly transformed itself from a staffing services company into an IT services business with higher margins and more steady performance. Adjusted EBITDA has increased from $9.5 m in 2018 to $12.5 m in 2019 and $15m in 2020. CTG performed well during the Covid-19 pandemic and its business showed strong resilience as work from house requirements drove increased need for its innovation services.
CEO Filip Gyde ran CTGs European department effectively for numerous years and was made CEO in early 2019 and has pursued an aggressive program to exit lower margin staffing services and grow higher margin and more resilient solutions services considering that taking over. We believe Gyde has a laser-focus understanding of which specific services are most crucial to existing and possible customers and is carefully constructing a strong and resistant solutions service throughout all of CTG. CTGs European operations currently offer a dominant share of overall operating revenues even though they are only about 40% of total incomes.
CTGs long-lasting targets include IT services income of over $250m and changed EBITDA of $35m by 2023. While we are not persuaded CTG can attain these aggressive targets, our company believe CTG will move aggressively towards them and, as an outcome, drive strong investor value. CTG has an extremely cashgenerative company design with minimal capital expenditure requirements and a “Ft. Knox” balance sheet with a net money position of about $33m at Q1 of 2021, or about 20% of overall market price.
CTG has a “Ft. Knox” balance sheet with net money position of about $31m as of 9/30/21 for an overall business worth (EV) of about $90m. CTG is currently trading at about 6x adjusted EBITDA and a 10%+ unleveraged FCF yield.
CTGs method is to grow its IT services company to $250m of earnings by 2023. As shown below, IT Solutions is growing and becoming a larger part of CTGs overall company, as CTG is simultaneously exiting less successful IT Staffing service. CTG rents a total or owns of 25 facilities throughout the world, including North America, Europe, South America, and India.
CTG has grown EBIT from $6m in 2017 to $11m in 2020. CTG has actually completed 3 small acquisitions just recently, one each in 2018, 2019, and 2020, and these have helped to drive growth.
CTG serves the monetary services, health care, energy, and production markets, as well as innovation service suppliers.
CEO Filip Gyde ran CTGs European department effectively for lots of years and was made CEO in early 2019 and has actually pursued an aggressive program to exit lower margin staffing services and grow greater margin and more resilient solutions services given that taking over. We believe Gyde has a laser-focus understanding of which specific solutions services are most critical to existing and prospective clients and is carefully building a resistant and strong options organization across all of CTG. While we are not convinced CTG can accomplish these aggressive targets, we think CTG will move strongly towards them and, as a result, drive strong shareholder value. As suggested listed below, IT Solutions is growing and ending up being a larger part of CTGs overall organization, as CTG is simultaneously leaving less rewarding IT Staffing service.
