A Turnaround That Actually Turned for 6x Free Cash Flow
Buffett has famously reminded investors that “turnarounds seldom turn”. We agree with this statement both from firsthand experience and studying the results of other turnaround investors. For that reason, we rarely invest in true turnarounds. There are, however, exceptions that prove the rule, and here we’ll explore a business that we think falls in the “seldom” category of a turnaround that already has turned around, but plenty of upside remains for shareholders.
Today’s company:
Recently transformed itself from a money-losing business to a niche, non-cyclical, highly cash-generative business under new leadership;
Is nearing an inflection point that should tip the company from years of revenue declines to modest long-term growth;
Has recently undergone a dramatic change in capital allocation resulting in imminent dramatically increased shareholder capital returns;
Is undertaking a strategic review led by an activist investors with an outstanding track record and is likely to sell part or all of its business for substantially more than the current market price;
Trades for around 6x free cash flow.
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