Wednesday, March 30, 2005

Trading Below Net Current Asset Value:
Nu Horizons Electronics
Ticker: NUHC
Price: $7.03
P/E: 37
Market Cap: $119 million
Net Current Asset Value: $120.1 million
Average daily volume: 38000

Nu Horizons Electronics is a small, Melville, New York based electronics distribution company. Products include microprocessors, memory chips, transistors, diodes, fiber optic components, and other semiconductor related items.

We recently identified this as a profitable company trading below NCAV. (Finding a company trading below NCAV that isn’t profitable is relatively easy. Those that are simultaneously generating a profit are few and far between.)

The Numbers
Fiscal year 2004 sales were $346 million, up 15 percent from 2003’s $302 million. Net loss was $850 thousand in 2004, versus a loss of $2.5 million in 2003. However, for the trailing 12 month period (through the third quarter of 2005) the company has managed net income of $3.38 million, on sales of $456 million

The Balance Sheet
As of 11/30/04, the company had $17 million in cash and $40 million in long-term debt. Current ratio stood at a very health 6.56, while quick ratio was also solid at 3.1. All in all, a decent, but not great, balance sheet. (If you’ve read our NCAV reports in the past, you know how much we here at Cheap Stocks love cash, and dislike debt in our NCAV companies)

The NCAV Calculation (in millions)
Current Market Cap: $119
Current Assets: $192
Current Liabilities: $29
Long Term Liabilities (primarily LT debt) $42
Net Current Asset Value: $121
NCAV/Market Cap: 1.02

The Street/Institutional ownership
Currently, just one analyst is covering this company. There is however, a great deal of institutional ownership.
Wasatch Advisors: 9.3 %
Royce & Associates: 8.8 %
Wellington Management: 8.2 %
Dimensional Fund Advisors: 7.8 %
David L Babson & Co: 5.4 %
Fidelity: 3%
Delphi Management: 3%

If anything, this is an interesting story. But then again, anytime you identify a profitable company trading below it NCAV, it’s interesting. Sales for the past three quarters have been picking up nicely versus prior year/same quarter numbers, and the company has been in the black for 5 consecutive quarters. An improving economy and renewed interest in the tech sector should help move this company forward.

*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.

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