TOP IDEAS: Caldwell Partners International (TSX: CWL) has posted another record year with revenues of C$72 million, and the stock price still needs to catch up.

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.

It has been seven years since the Investorfile blog first recommended to small cap value investors the investment idea to purchase stock in Caldwell Partners International Inc. At that time the stock was trading at C$0.74 per share. (See: Caldwell Partners International: US expansion pays "dividends” for small cap value investors). Since that blog post, shareholders of the Company have been paid back C$0.5425 per share in dividends, which implies a net cost base of only C$0.1975 per share on the original investment. Today the stock trades at a share price C$1.29, which amounts to a total gain (from the net cost base) of about 553% for investors who continue to hold the stock. To date, owning stock in Caldwell Partners International has been a good small cap investment.

That said we believe the biggest investment gains from owning this stock are still to come.

Caldwell Partners International Inc. (TSX: CWL - $1.29) 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 in Australia 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 the firm, in addition to licence fees as a percentage of revenues earned from its affiliates.

Fiscal 2019 has turned out to be another record-breaking year for revenues. With the aid of a strong Q4, whereby Caldwell Partners set an all-time record for quarterly revenue at C$21 million, total revenue this past fiscal year amounted to C$72.1 million. The revenue growth momentum for Caldwell Partners should continue into fiscal 2020 too, according to Management comments. The Q1 report for fiscal 2020 should be released early in the New Year.

The Company has more doubled in size since Investorfile began its coverage of Caldwell Partners. At that time, the revenues base was about C$33 million. Over the years, the Company targeted four to five executive search partner hires per year to grow. Each additional partner can add $1- 2 million in revenues annually. Currently Caldwell has about 40 partners.

While the revenue growth for the Company has been consistent, it has gone under the radar by gaining little recognition from the investment community. But we feel that there maybe a new mandate by Caldwell’s Board of Directors to better utilize the capital markets and grow the Company faster by making strategic acquisitions. As such, Caldwell has several new board members: Elias Vamvakas (Chairman), John Young and Darcy Morris, all of whom have extensive capital markets and acquisition experience. Collectively, the members of Caldwell Partners' Board of Directors now own or control over 20% of the Company’s outstanding shares.

There is no doubt that the stock price has not keep pace with the Company’s growth. Today Caldwell Partners’ shares trade at market valuation equal only to 35% of its annual revenues, despite the Company being profitable and debt-free.

Investorfile is of the opinion that there is a strong incentive from the new board leadership to unlock shareholder value in Caldwell Partners. By what means they achieve this we will wait and see. Fair value for a profitable executive search firm is close to one-time annual revenues, which implies a very significant premium to the Company’s current stock price.

For small cap investors who want to catch the stock’s upside potential, they can purchase shares today and earn a 7% dividend. In the past, owning stock in Caldwell Partners has produced very good returns. But for the future, we think owning stock in Caldwell Partners may turn out to become a great investment.

The Company has approximately 20.4 million shares outstanding.

The Caldwell Partners International website: www.caldwellpartners.com

Author ownership disclosure: TSX: CWL - YES

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This article is for informational purposes only. This article is based on the author's independent analysis and judgment 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 this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

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