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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.


Value Line


Value LineValue Line (NASDAQ: VALU)

Value Line was founded in 1931 by Arnold Bernhard, who ran the company until his death in 1987. Bernhard  began his career as a playwright and a theater critic for the New York Post, but
after falling in love with investing, he became an analyst for Moody's Investor Service.   After the fallout of the Great Depression, he brought on a few clients and began building Value Line into the powerful
financial services brand it is today. Shortly after his death, control of the company went to his daughter, Jean Buttner, who remains chairman and CEO.

Buttner has  imposed some  extremely conservative fiscal practices and has run a very tight ship at the company.

Value Line boasts one of the largest independent research staffs of investment analysts and statisticians in the world. The company  collects data and analyzes performance of approximately 8,000 stocks, 13,000 mutual funds, 80,000 options and other securities. The company has  76 years experience of  tracking, analyzing and ranking investments. The company is best known for The Value Line Investment Survey, one of the most widely read investment services in the world.
Value Line publishes more than a dozen investment related print and electronic products which are used by more than half-a-million investors for timely information on stocks, mutual funds, special situations, options and convertibles. These generate the majority of its revenues. The remaining  38% of revenues comes from managing 14 open-ended mutual funds with nearly $3.8 billion in assets.

This company has a rock-solid brand name with a 76-year history in the industry and a bulletproof balance sheet.  It has strong takeover target potential with lots of cash on hand, no debt, and plenty of free cash flow generation -  $20.1 million during the past four reported quarters.

Value Line remains a solid and profitable business.Gross margins have hovered around 90 % for the last few years. Revenues have been pretty much stagnant for the past several years.  This lackluster revenue growth probably explains why the company still has a low trailing price-to-earnings (P/E) ratio of 17. Improvements in operating expenses, particularly cuts in sales and general  administrative expenses , have boosted net margins and led to steadily improving earnings.

For the past 12 months, net margins have been  an impressive 29.5%, and  earnings per share were $2.51.  If Value Line can accelerate its top line, then the result should be greatly increased  profits. Value Line has no debt and boasts a great  return on equity of 39% and return on capital of 36%.  It pays 2.6% dividend yield.

The future bodes well for Value Line, as affordably priced research products will be in increasing demand as more investors start to control their own finances. Value Line can also boast an impressive list of institutional clients.

In the current Mergers & Acquisitions climate,  Value Line could easily become an acquisition target, as part of the ongoing consolidation wave in publishing and financial services. An acquisition or management shakeup could be an additional boost for shareholders. But even if an acqusition does not eventuate, the stock still looks like a good buy at these levels. Value Line is a stable, dividend-paying stock with rock-solid fundamentals. 

Buy Value Line (NASDAQ:VALU) up to $56


Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.