More Bargains From 'Double Net' Land
While I listed a handful of names that currently fit the criteria for what I refer to as "double nets," there are many others. As previously mentioned, this list is dominated by technology companies, but just because they are cheap relative to net current assets does not make them screaming buys.
Many tech-related companies have appeared to be cheap on a whole host of different metrics for much of the past few years, and they've continued to trade that way. In my view that has a great deal to do with the state of the global economy, and that trend may continue into the foreseeable future.
But it never hurts to probe the depths of deep-value land for smaller names that are cheap, and may reap the rewards of a pickup in economic activity.
Among the bigger names is $1.4 billion market cap company MKS Instruments (MKSI) , which makes process control systems used to measure and analyze manufacturing performance. MKS currently trades at 1.82 times net current asset value, and 1.38 times price to book value per share.
As is the case with many of the most intriguing double nets, the company's balance sheet is very strong. MKS ended the latest quarter with $606 million, or $11.50 per share in cash and short-term marketable securities, and no debt. That's a remarkable amount of cash for a company trading in the $26 range.
Recent results for the company have demonstrated some weakness; third-quarter revenue of $177.4 million missed consensus estimates by $10 million, and earnings per share (35 cents) missed by 2 cents. Still the company is profitable, and trades for 15 times trailing earnings and 18 times the 2013 consensus estimate.
It's not exactly cheap on a price/earnings basis, but besides the great balance sheet there is another factor that makes MKS interesting: the company's dividend.
Monday, MKS announced a 7% increase in the quarterly dividend, to 16 cents per share, for an indicated yield of 2.4%. When I see companies raising dividends, it signals to me that management is confident about the future. A little confidence can go a long way, and the company's balance sheet is strong enough to see it to better economic times.