AstroNova, Inc. ALOT
February 10, 2022 - 12:40pm EST by
andreas947
2022 2023
Price: 13.97 EPS 0 0
Shares Out. (in M): 7 P/E 0 0
Market Cap (in $M): 99 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 98 TEV/EBIT 0 0

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Description

 

Astronova, Inc. (ALOT)

 

 

Summary

 

We focus on smaller companies with "Ft. Knox” balance sheets and large & sustainable free cash flow yields and we are typically seeking a double-digit FCF yield or higher on an unleveraged basis.  The objective is for the sustainable FCF to eventually drive up the share price to a more reasonable valuation through share buybacks, debt reductions, dividends, or accretive acquisitions.  Obviously, it is important we have a management team that cares about shareholder value.  We focus on small-cap stocks because there is a much better chance to find an attractive investment opportunity which is under-followed or undiscovered.

 

AstroNova, Inc. (ALOT) designs, develops, manufactures, and distributes specialty printers, and data acquisition, and analysis systems in the United States, Europe, Asia, Canada, Central and South America, and internationally. The Company operates through two segments, Product Identification (PI) and Test & Measurement (T&M). The PI segment offer tabletop and production-ready digital color label printers, as well as specialty OEM printing systems under the QuickLabel brand; digital color label mini-presses and all-in-one specialty printing systems under the TrojanLabel brand; and pressure sensitive labels, tags, inks, etc. This segment also develops and licenses various specialized software programs to design and manage labels and print images, as well as manage and operate its printers and presses on an automated basis; and provides training and support. It serves chemicals, cosmetics, food and beverage, medical products, etc. 

 

In the T&M segment, there are two groups including Aerospace and Test & Measurement. The Company was founded based on the Test and Measurement segment with NASA, but it has evolved as primarily an aerospace and defense business overall. The biggest focus in the T&M segment is the Aerospace business. The Company has a long history of using their technologies to provide networking systems and high-resolution light-weight flight deck and cabin printers for the aerospace market. In addition, the T&M segment includes data acquisition recorders, sold under the AstroNova brand, to enable their customers to acquire and record visual and electronic signal data from local and networked data streams and sensors. The recorded data is processed, analyzed, and stored and presented in various visual output formats.

 

Below is a video that provides a brief overview of the different types of products that ALOT creates. The Company has a comprehensive product portfolio.

 

https://www.youtube.com/watch?v=ig-drI4sPjE

 

ALOT’s shares currently trade at about $14 per share with about 7m shares outstanding for a market cap of about $98m. ALOT has a strong balance sheet with a net cash position of $1m as of 10/31/21. LTM EBITDA is about $10m, excluding government support payments. LTM free cash flow (FCF) is about $4m. ALOT is currently trading at about 10x LTM adjusted EBITDA despite its T&M segment operating at depressed levels.

 

We believe ALOT has a very strong and resilient business model which should produce strong results over the next 2-3 years.  Over the past two years, ALOT’s T&M segment has been highly depressed due to the grounding of the 737 MAX aircraft and sharply reduced air travel due to Covid-19.  We expect these factors to reverse over the next 2-3 years and this process has already started.  The T&M segment results could rebound strongly to levels achieved in 2018 and 2019 as 737 MAX production ramps up and domestic air travel continues to rebound.  Meanwhile, the PI segment has generated very strong results over the past two years to support the company while the T&M segment has been depressed.  We believe investors are pricing in almost no rebound in T&M from current levels.  We believe as T&M segment results rebound, ALOT’s consolidated results could improve sharply.  We believe ALOT could generate consolidated adjusted EBITDA of $17m+ by 2024.  ALOT has a capital-light, cash-generative business model with capital expenditures of $3m per year.  ALOT has a highly resilient business model with close to 65% of total revenues recurring in nature in terms of supplies and services.  We believe ALOT could trade for at least 10x adjusted EBITDA of $17m in 2024 with net debt of zero for a market cap of about $170m.  Based on 7m shares outstanding, ALOT would have a share price of about $24 per share or about 70% higher than the current price of about $14 per share.

 

Business Description:

 

ALOT leverages their expertise in data visualization technologies to design, manufacture, and market specialty printing systems, test and measurement systems, and related services for select growing markets on a global basis.

 

The business consists of two segments, Product Identification (“PI”) and Test and Measurement (“T&M). Product Identification products sold under the Quick Label, Trojan Label and Get Labels brands are used in brand owner and commercial applications to provide product packaging, marketing, tracking, branding, and labeling solutions to a wide array of industries.

 

The PI segment is currently largest segment as T&M results have been depressed. The PI segment has to do with both labeling products, creating labels that can go onto products, as well as labeling those products themselves on the packaging. This segment offers a variety of digital color label tabletop printers, high-volume presses and specialty OEM printing systems, as well as a wide range of label, tag, and flexible packaging material substrates and other supplies, such as ink and toner, allowing customers to market, track, protect, and enhance the appearance of their products.

 

In the T&M segment, there are two groups including Aerospace and Test & Measurement. The Company was founded based on the Test and Measurement segment with NASA, but it has evolved as primarily an aerospace and defense business overall. The biggest focus in the T&M segment is the Aerospace business. The Company has a long history of using their technologies to provide networking systems and high-resolution light-weight flight deck and cabin printers for the aerospace market. In addition, the T&M segment includes data acquisition recorders, sold under the AstroNova brand, to enable their customers to acquire and record visual and electronic signal data from local and networked data streams and sensors. The recorded data is processed, analyzed, and stored and presented in various visual output formats.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over the last several years, ALOT has been set up in three regions including North America, Europe, and Asia. The North American hub is located at the headquarters in Rhode Island, United States. The European hub is based in Frankfurt, Germany and the Asia hub is based in Shanghai, China, with a satellite office for domestic business in Malaysia, as well as an Aerospace hub in Singapore.

 

ALOT currently has products in 155+ different countries, as shown in the slide below. All of the countries highlighted in purple have ALOT products and include active customers utilizing ALOT products.