A hidden gem is Spectra Products Inc (SSA). Probably one of the most undervalued technological stocks is Spectra Products Inc (SSA) while being cashflow positive and in line with earnings. Even during Covid lockdowns it has made profit, creating a P/E of 5 with the current stock price.
Enclosed is a picture from the Investor Presentations page 11, May 2021, showing the turnaround in the financial books (2014-2020).
https://www.spectrainc.ca/presentations
Management has over the years turned around its books and cleaned its debt while making good cashflow from mostly its main products Brake Safe & Brake Inspector. Brake Safe & Brake Inspector are visual brake stroke indicators that permits vehicle drivers to determine the brake adjustment condition of a truck, trailer or bus equipped with an air activated brake system.
Future growth will partly be seen in Termin-8R which protects Electronics against corrosion in the Electric Vehicle (EV) market. Moreover, even during the lockdown the company did well and continued making profit, cash and cleaning debt without any new shares.
Furthermore, SSA has more products. I would advice looking at their sales website https://www.spectraproducts.ca/ for more information. They have a specific website for investor information, which is up to date, a rare thing to see for smaller firms. https://www.spectrainc.ca/
Moreover, management is looking into more marketing for International sales. Management and institutions own more than 30% of the shares.
Low P/E with earnings and cashflow:
Safety on the road is always needed and the company has at the moment 1 cent cash per share and a stock price of 5 cents. Any debt left is purely operational. Based on past performance the company has made the last 3 years 1 cent profit per share, even in 2020 during lockdowns, creating a P/E of 5 with current stock price. If anything the company earns easy cashflow for its shareholders. Operating Cash Flow has also been 1 cent per share even during Covid-19 Lockdowns.
In other words, the company can buy itself at the stock market price in 5 years current earnings.
Why is Spectra Products Inc worth a multibagger?
With debt free and cashflow in line with profits I don't see any reason why SSA can't be at least, for example, the weighted average P/E from the Russel Microcap Index, which stands at 14. Meaning 14 * 1 cent profit is 14 cents at least. That is while an Index can have stocks with bad financials as well. https://ycharts.com/companies/IWC
Therefore, I believe there is fair potential for a 3-bagger here. That is only making the stock price to an average market P/E.
The articles below give a further overview on SSA compared to the industry and the market. I believe SSA looks even better as last years earnings were less, but still good, due to the lockdowns.
https://simplywall.st/stocks/ca/automobiles/tsxv-ssa/spectra-products-shares#PE-PEG-gauge
What are other thoughts from investors here? Should perhaps a private equity approach be better for the valuation? Did I miss something with SSA?
I myself am asking management to market itself more for product sales and also towards investors. This hidden gem needs to be found. Furthermore, to look into a future share buyback with the excessive cashflow. A few more investors emailing/calling management can do the trick.
I’m optimistic with the proven track record and strategy of the new management.
