SnarkyPuppy

Would've done well if I bought at the time of my last post, albeit this was not something we could've predicted. Stocks up 50% today http://finance.yahoo.com/news/appliance-recycling-centers-america-announces-230100577.html

I did some work on this and it is very cheap strictly from a valuation perspective. Free cash flow (defined as CFFO-capex) is as follows: FY13: $1.2mm FY14: $2.7mm TTM: $1.4mm Given a current market cap of 4.5mm, this equates to 3.6x, 1.62x, and 3.11x reported free cash multiples. FY11 reported (0.4mm) FCF which was due to $1.7mm in capex. Capex has since been lower and consistent going forward: FY12 $0.8mm, FY13 $0.5mm, FY14 $0.8mm, TTM $0.8mm. FY12 reported (0.3mm) FCF which was entirely driven by a seemingly one-off drop in recycling revenue (recycling revenues have been as follows: FY11 $33mm, FY12 $25mm, FY13 $41mm, FY14 $46mm, TTM $40mm). D&A are also consistently more than capex spend. Additionally, they are trading at about 1/3 book value which is always fun. Qualitatively, there are two main unknowns that are keeping me from pulling the trigger - the companies reliance on utility companies and the fact that I do not understand the competitive landscape of the market. Both of these kind of go hand in hand. Revenue generated from recycling is the key component of the business that makes this company attractive (the retail segment has very low margins and has been losing a little bit of cash). The company generates recycling revenues primarily through short term contracts with utility companies energy saving programs (e.g. utility company wants their customers to use more energy efficient appliances to lessen capacity requirements and therefore hires ARCI to pickup the old appliance... and sometimes replace with a new energy efficient appliance). I'm concerned about the companies ability to continue to enter into these short term contracts with utilities companies. The FCF is only as good as their continuous ability to win these contracts and I'm just not well versed enough in the industry to understand how competitive the industry currently is/will be in the next couple of years. Additionally, as someone has already pointed out, they disclosed in Q3 2014 that one utility company comprised of roughly 40-50% of these types of revenues - not sure how great the FCF looks if that drops. Do you have any insight into this?