Jump to content

Recommended Posts

Posted
1 hour ago, lnofeisone said:

are you bailing on HQI or rightsizing?

 

Just right sizing. It was over a 7% position this morning after earnings and I'm more comfortable in the 4 to 5% range. I'm down to a 6%ish position. I've been buying for the last couple weeks in the 12.1X's and was selling this morning in the 12.80+ range.  It's tough getting in and out of when in only trades 15k shares a day and and individual can be a significant portion of that. 

Posted
9 minutes ago, Ross812 said:

 

Just right sizing. It was over a 7% position this morning after earnings and I'm more comfortable in the 4 to 5% range. I'm down to a 6%ish position. I've been buying for the last couple weeks in the 12.1X's and was selling this morning in the 12.80+ range.  It's tough getting in and out of when in only trades 15k shares a day and and individual can be a significant portion of that. 

Got it. Thanks. I'm looking to double this one to roughly 5% range. I think the challenges will work themselves out and we'll be heading back to the 20+ range. 

Posted
2 hours ago, lnofeisone said:

Got it. Thanks. I'm looking to double this one to roughly 5% range. I think the challenges will work themselves out and we'll be heading back to the 20+ range. 

 

Even with some acquisition expenses, tough YoY workers comp. increases, and a temporary staffing market down 9% YoY, HQI is doing well which speaks to the quality of the business.  The case is pretty straight forward in my mind -  hit less than 50% SG&A on franchise revenue of $36M and a 17% tax rate and you are looking at $15M in earnings on 13.8M shares outstanding - and this is earnings power in an off-cycle year!  You're paying 10x EBIT and 12x earnings right now for a company growing at 27%. 

 

I get the argument growth is coming from acquisition and that is worth a lesser multiple, but acquisitions are immediately accretive to the bottom line. Look at MRI Network (which is under earning right now), acquired 4Q22 for $13.3M and added $7.8M in revenue in the last year; they paid <2x franchise revenue.

 

Northbound (higher quality executive staffing) was purchase for $11.4M and generated $1.1M in 10 months ($1.3M proforma); 8.75x franchise revenue

 

Dubin - 10 months $.11M ($132k proforma) on a $2.5M outlay. 19x franchise revenue 

 

TEC - looks to be $1.1M on a $7.8M. 7x franchise revenue

 

Temp Alternatives- $523k (though not all converted to franchises yet) off $7M. 14x franchise revenue

 

Together its $10.7M (proforma) in franchise earnings acquired for $42M. Assume 50% SG&A and slap a low 10x EBIT multiplier and you are adding $53.5M to the market-cap (27% growth). Looks like a sustainable roll-up to me. 

 

Organic growth should follow growth in temporary staffing. Check this by looking at HQI ex-franchise revenue from FY23 acquisitions ($9.6M) which is $26.2M vs $28.9M (FY22) down 9.3% which is in line with temporary staffing down ~9%. The good new is temporary staffing follows GDP over the long term so the business should grow organically by 2-3%. I don't know what kind of EBIT HQI should trade at, but its not 10x and when you start playing with the EBIT multiple the spring keeps tightening.  

 

Posted
16 hours ago, Ross812 said:

 

Even with some acquisition expenses, tough YoY workers comp. increases, and a temporary staffing market down 9% YoY, HQI is doing well which speaks to the quality of the business.  The case is pretty straight forward in my mind -  hit less than 50% SG&A on franchise revenue of $36M and a 17% tax rate and you are looking at $15M in earnings on 13.8M shares outstanding - and this is earnings power in an off-cycle year!  You're paying 10x EBIT and 12x earnings right now for a company growing at 27%. 

 

I get the argument growth is coming from acquisition and that is worth a lesser multiple, but acquisitions are immediately accretive to the bottom line. Look at MRI Network (which is under earning right now), acquired 4Q22 for $13.3M and added $7.8M in revenue in the last year; they paid <2x franchise revenue.

 

Northbound (higher quality executive staffing) was purchase for $11.4M and generated $1.1M in 10 months ($1.3M proforma); 8.75x franchise revenue

 

Dubin - 10 months $.11M ($132k proforma) on a $2.5M outlay. 19x franchise revenue 

 

TEC - looks to be $1.1M on a $7.8M. 7x franchise revenue

 

Temp Alternatives- $523k (though not all converted to franchises yet) off $7M. 14x franchise revenue

 

Together its $10.7M (proforma) in franchise earnings acquired for $42M. Assume 50% SG&A and slap a low 10x EBIT multiplier and you are adding $53.5M to the market-cap (27% growth). Looks like a sustainable roll-up to me. 

 

Organic growth should follow growth in temporary staffing. Check this by looking at HQI ex-franchise revenue from FY23 acquisitions ($9.6M) which is $26.2M vs $28.9M (FY22) down 9.3% which is in line with temporary staffing down ~9%. The good new is temporary staffing follows GDP over the long term so the business should grow organically by 2-3%. I don't know what kind of EBIT HQI should trade at, but its not 10x and when you start playing with the EBIT multiple the spring keeps tightening.  

 

Thanks for this. I think they are reasonably good with the roll ups and you are right. The spring keeps tightening. Just needs some patience. 

Posted
1 minute ago, Ross812 said:

Well, that didn't last long. More HQI this morning. $11.50-$11.70

I almost pulled the trigger on some more, but don't really want to size this any larger unless it gets ungodly cheap. Wouldn't mind seeing some more insider buying like last year as well. 

Posted

I went to 7.X% when it was in the low 12's after insider buying in January and February and sold down to 6% last week when it popped to 13 after earnings. I had higher sell orders that never triggered. I was a little shocked when i saw an 11.XX quote this morning as I  didn't expect this back below 13 range after earnings. Maybe I'm missing something.  

Posted

I'd ideally like to hold HQI at a 5% cost basis and let it run. My trading around has just been lowering the cost basis. I did buy a little with OPM this morning.  

Posted
15 minutes ago, gfp said:

NIce. Yea these guys are doing something incredible. Sports monetization is all about the licensing and Rubin has basically used Fanatics plus initial ownership in a couple teams to infiltrate that ecosystem. It started out as just apparel and now its basically in everything. This will be a royalty like machine on the Big 4 American Leagues. The key of course, is you need the teams and leagues to grant you the licenses...and well, he's allowed the Players Unions to be large investors in Fanatics....how brilliant. Its now in the Players interests to let Fanatics make as much money as possible. 

Posted (edited)
2 hours ago, Gregmal said:

NIce. Yea these guys are doing something incredible. Sports monetization is all about the licensing and Rubin has basically used Fanatics plus initial ownership in a couple teams to infiltrate that ecosystem. It started out as just apparel and now its basically in everything. This will be a royalty like machine on the Big 4 American Leagues. The key of course, is you need the teams and leagues to grant you the licenses...and well, he's allowed the Players Unions to be large investors in Fanatics....how brilliant. Its now in the Players interests to let Fanatics make as much money as possible. 

I do wonder how sustainable their growth is when their product quality is complete garbage. Great companies don't cut corners. I wonder if their sports cards are as bad as their apparel.

Edited by EBITDAg
Posted
8 hours ago, EBITDAg said:

I do wonder how sustainable their growth is when their product quality is complete garbage. Great companies don't cut corners. I wonder if their sports cards are as bad as their apparel.

 

Yeah I do hope they can figure out their quality issues. I know for hockey jerseys they're considered absolute junk next to Adidas, and the see-through baseball pant debacle has brought their name to the masses for all the wrong reasons. Still, they seem to be taking over sports apparel.

Posted
1 hour ago, Eng12345 said:

Interesting what's the thesis here? 

So, with the caveat that I should have bought at half the price, the thesis is: demand for power is going up, price for power is going up, this company will see growing profits, will buy back shares, and is at a huge discount to CEG and sells at a double digit free cash flow yield a year or two out.

Posted
3 hours ago, Dinar said:

So, with the caveat that I should have bought at half the price, the thesis is: demand for power is going up, price for power is going up, this company will see growing profits, will buy back shares, and is at a huge discount to CEG and sells at a double digit free cash flow yield a year or two out.

You might have bought my shares! I bought this in the fall, mostly of the VIC thesis which I liked. But I think lower natural gas prices put a bit of a cap on the upside here so I took the profits. The federal minimum price of nuclear really limits the downside, so I think it's probably fine here, but if nat gas stays low I think that will limit upside.

 

Uplisting and index add catalysts still to come though, so I certainly could have sold too early.

Posted
2 minutes ago, bizaro86 said:

You might have bought my shares! I bought this in the fall, mostly of the VIC thesis which I liked. But I think lower natural gas prices put a bit of a cap on the upside here so I took the profits. The federal minimum price of nuclear really limits the downside, so I think it's probably fine here, but if nat gas stays low I think that will limit upside.

 

Uplisting and index add catalysts still to come though, so I certainly could have sold too early.

You were smarter than I was.  I think the sale of the assets in Texas + the deal with Amazon are a very big deal.  

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...