CDI Corp A Profitable Net Net Investment

CDI Corporation (CDI) is a profitable small cap company selling below its net net value. The company has a simple business model with a strong balance sheet and no debt. However, over the last 15-years bad management mismanagement the company and its contracts. Resulting in the company's revenues and earnings stagnating over the last decade. This has a resulted in new management taking over the company in September of 2014. New management is incentives to do what is right for shareholders since their compensation package is design to insure that.

CDI Corporation is a staffing agency that operates three business segments and employees 800 staffer and 9,000 billable employees.
The company hires sales people and recruiters who hire contractors and than sources than out to clients. Contractors are paid a set fee and charges a markup. When the business slows down or recruiters don't meet their quota CDI downsides their headcount. Thanks to the company simple business model its requires little capital to grow the business.

CDI Corporations Three Business Segments:
  1. Global Engineering and Technology Solution (GETS) - provides engineering and information technology solutions that involve principally the production of deliverable work products.
  2. Professional Staffing (PSS) - provides skill technical and professional personnel for discrete assignments.
  3. Management Recruiters International (MRI) - Is a global franchiser that engages in recruitment of executive, technical, professional and managerial personnel for employment

The company through its three business segments provides various staffing services ranging from temporary to professional staffing. Over the last 15-years the company under its former management saw its earnings and revenues stagnate. CDI languish under its former management despite its simple and low cost business model. The company should have performed better across the board. Over the last 15-years the company has been profitable, however, its earnings were inconsistent. The reason for its flat earnings and revenues were mainly from fixed contract entered into by the former management of the company. CDI under its former management wrote contracts that provide the company little wiggle room in the event of cost overruns. This resulted in margins falling from 28% in 2000 to 18% in 2014. As a result of these action, shareholders forced the company to replace the CEO.

In September 2014, the company announced  that Scott Friedheim would become CEO of the company. He has a long-history of being very successful at turnaround companies. Mr. Friedheim is the former president of Sears' Kenmore, Craftsman, and Diehard  divisions until 2011. He did a excellent job and lead the division back to profitability. Before joining CDI, Mr. Friedheim was CEO of Investcorp International Ltd. European division.

CDI board of director design Mr. Friedheim compensation package to put his interest long that of shareholders. He will receive a base salary of $600,000 a year and can receive million only if he creates value for shareholders that results in stock price appreciating.

Value Creation Contingent Awards:The value creation contingent awards will be vested over a five year period. His compensation is heavily weight to appreciating the company share price. With Mr. Friedheim interest properly align with shareholders will increase the chances that over the five years shares will make at least 2x their money.

CDI Corp is a great investment opportunity that investors should love. The company has no inventory to deal with and no need for heavy capital spending. CDI should be throwing out cash for and producing above average returns. However, the company couldn't do its under its former management. I believe CDI new CEO will be able to take advantage of the low capital intensive business model to through off cash to reinvest in the business and increase the company return on equity and assets above 1.5% and 1.%. The company has over $30 million in cash that it can use to buyback its shares and use the cash its produces from operations to maintain the company's light operations.
Published on Oct 5, 2015
By Cody Eustice
Cody is a freelance writer who has been writing financial articles for various sites for over a year now. He is a value investor looking for companies that sell for far less than their estimated business value.

Copyrighted 2016. Content published with author's permission.

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