Despite the stability of this industry, and Ridley's role as one of the larger players with $600 million of annual sales, the company is conservatively capitalized with only $13 million of debt compared to equity of $150 million. Meanwhile, the company trades for just $100 million, while it has brought in combined operating cash flow of over $60 million over the last four years.
While the company may seem attractive at these levels, the stock is rather illiquid, meaning institutional investors cannot realistically participate in this opportunity. The company is not that small compared to some of the other stocks we've discussed on this site, but what keeps the stock volume low is the fact that more than 9 million of the company's 14 million shares outstanding are held by Fairfax Financial (FFH), one of the best value-oriented firms out there, as we've previously discussed.
Like Dorel, RCL appears to be utilizing the recession to make acquisitions. The acquisitions should add value for shareholders, considering the fact that a value firm like Fairfax is a majority owner. For example, RCL's latest acquisition should allow it to sell its existing products to new customers as well as sell the target's products to RCL's existing customers.
So while most investors apply valuation discounts for both 1) stock liquidity and 2) controlling shareholders, for value investors with long term outlooks this stock could represent ownership in a business at an attractive price where the principal shareholder's views on stock ownership are aligned with those of the individual investor.
Disclosure: Author has a long position in shares of RCL