I don’t think quarterly updates are particularly useful. The thesis remains intact from the previous article, but I figured I’d briefly touch on what I found interesting from the release and earnings call:
1) 2Q Weakness One-Off Blip- If there was any skepticism around managements explanation of a weak 2Q19, this quarter proved it was truly transitory.
2) Operating Leverage- Sales grew at a 12% clip but this drove a 50% growth in EBIT to $536k. Stock is trading close to 10x EBIT going forward, assuming no future growth.
3) Strategic Alternative In 1Q18- Company expects to give update on review underway early in the company’s 1Q2020, which begins 2/1/19.
Investors continue to be in a good position. If the company is purchased as a result of the strategic initiatives, I think it comes at a price about 100% higher than today. If the company remains independent, there is a solid growth runway to a $50-60mm annual sales level.
I hold a position in MMMB. Any article is only opinion and not a recommendation to buy or sell.
Mesaba Range Value 