TOP IDEAS: With a new cost structure in place, Caldwell
Partners International (TSX: CWL) can grow revenues to build profits while paying shareholders a handsome dividend. Fiscal 2017 is off to a
Investorfile's share price accumulation target of $1.30 for
Caldwell Partners International Inc. was reached on July 18, 2014. For the
record, we do not revise share price targets for our Investorfile Top Ideas -
Small Cap Value Stocks. We have positioned our blog to be one of the first
providers of a pragmatic perspective of a small cap company stock's potential
worth, where there may be uncovered value that has been largely overlooked by
the investment community.
What a difference a year can make: Caldwell Partners
International Inc. (TSX: CWL - $1.20) posted earnings of $0.038 per share in Q1 of
fiscal 2017 compared to losing $0.008 per share in Q1 of last year.
Caldwell Partners International is a premier executive
search firm whose focus is on the high end of the employment search market; for
CEOs, CFOs, presidents, boards of directors and senior level positions where an
executive search is seen as an important business investment rather than an expense.
Caldwell Partners' executive search expertise extends from offices in Canada, USA
and the UK with affiliates
throughout Latin American and New
Zealand serving a multiple of major
industries, including Financial Services, Technology, Industrial, Insurance,
Healthcare, Consumer, Media and Government.
Caldwell Partners’ revenues are primarily generated from
executive search fees that it shares with its partners in addition to royalty
fees earned from its affiliates.
No doubt, fiscal 2016 was a challenging year for Caldwell
Partners. Despite having annual revenues of $57.6 million, profits were down.
The Company said that last year the falling oil prices in Canada dampened
economic activity, resulting in declining search volumes which impacted its results.
Also in the USA and UK, the Company
admitted that staffing and office expenses were not properly aligned to
executive search volumes, which had a profound impact on profits last year. Due
to the lower profits, the Company’s stock price was down.
As a result, in the latter part of fiscal 2016, the
Company’s Management initiated a cost reduction plan and changed its partners’
and management’s compensation cost structure to better position Caldwell
Partners to grow profits annually while paying its shareholders a sustainable
dividend. Q1 in fiscal 2017 has already shown improved profitability. But
Management believes the second half of fiscal 2017 will be more reflective of
stronger profit growth (over the prior year), the period when revenues are traditionally
Going forward, revenue growth still remains a priority but
at measured pace says the Company in its Q1 report. This is to ensure long-term
profitability and continuation of regular dividend payouts. Caldwell Partners’
board recently declared its 20th consecutive quarterly dividend payment.
Caldwell Partners says it expects future revenue growth will be driven by targeted executive search partner hires. Also, revenues from
royalties will increase. Royalty percentages earned by the Company from its international affiliates are already negotiated to double, beginning in
fiscal 2018. Caldwell’s
Management has said that it will also consider accretive acquisition
opportunities. The Company has a strong balance sheet.
Despite that, Caldwell Partners’ stock had previously
surpassed our target price but has retreated since, the return to date on this
investment -- if you include all dividend payments -- is still about 180% since
we first recommended the Company’s shares as one of Investorfile’s Top Ideas (See: Caldwell
Partners International: US expansion pays "dividends” for small cap value investors.)
Today we continue to like the stock. Therefore, the
Investorfile blog reaffirms its recommendation that for small cap investors,
Caldwell Partners’ stock is a value investment opportunity up to a target price
of C$1.30 per share. At $1.30 the shares still earn a dividend yield of over 6%. We
expect that the share price will exceed our target again as profits grow.
Recently the Investorfile blog featured Caldwell Partners
International in its annual predictions as our Top Ideas stock which could see
profits rebounding in 2017. (See: Investorfile
predictions for 2016 perform well. Looking forward to 2017–
Prediction #1.) So far, this prediction is right on track.
Caldwell Partners has approximately 20.1 million shares
The Caldwell Partners International website: www.caldwellpartners.com
Author ownership disclosure: TSX: CWL - YES
This article is for informational purposes
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and does not guarantee the information's accuracy or completeness. The
information contained in this article is subject to change without notice, and
the author assumes no responsibility to update the information contained in
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Investorfile.com is not engaged in an
investor relations agreement with The Caldwell Partners International Inc. nor
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The author of this article has acquired and
may trade shares of The Caldwell Partners International Inc. through open
market transactions and for investment purposes only.