Undervalued Micro-cap

Command Center (CCNI) is a $45 million micro-cap selling on the over-the-counter market with little to no analyst coverage. In 2013, new management was hired. The company has seen massive growth with high margins. Command Center growth has produced massive cash flow for the company. The company's large cash flow has allowed it to pay off debts and build up excess cash reserves. Command Center excess cash makes up 15% of its market capitalization. Management is determined to effectively use the cash. The company has authorized a $5 million share repurchase.
Command Center also plans to add new store or even make small acquisitions. The market hasn't given the company credit for its successful turnaround by management. Even after the company's turnaround it still selling for low valuation multiples.

Command Center is a temporary labor provider to blue collar industries like construction, hospitality and other various trades. The company operates 57 stores in 41 states throughout the United States.

The company saw its revenues in the first quarter of 2015 increased by 2.8% to $19 million compared to $18.5 million in the same quarter last year. Command Center increase in revenues was driven by improving revenues and profitability at existing branch locations. Revenues from the Bakken Shale region of North Dakota fell by 17% and was offset by revenues increases from branches throughout the United States. During the first quarter the company's gross margins increased 190 basis points to 28.3% from 26.4% in 2014. The company's improving gross margins were driven by lower workers' compensation costs, which came from the company's ongoing programs to improve employee safety.

Command Center produced operating income of $189,000 compared to $596,000 a year ago; this decline was the direct result of the company's plan to improve revenues and profitability generated at existing branches. The company has hired new people and provided those new employees better benefits. Command Center's saw its non-cash compensation in first quarter increased by $146,000. The company has extended its equity compensation program to included all full time employees. Command Center reported adjusted EBITDA in the first quarter of 2015 was $396,000 or $0.01 per share compared to $678,000 or $0.01 per share last year. The company saw its cash decreased from $8.6 million in December of 2014 to $7.9 million.

Over the last few year Command Center has turned itself around from a struggling company to a well-run and profitable business. Management has focused on winning high-margin business, controlling cost, and making its branches be responsible for their own profitability. The result of these actions have lead to rapid growth in operating income even with top-line revenues contracting. Command Center's CEO Bubba Sandford deserves a lot of credit for the company's turnaround. Management is clearly shareholder friendly and looking to return cash to shareholders through a share repurchase plan.

In April, Command Center announced a three-year $5 million stock repurchase program. The company plans to repurchase share to the extent the market does not fully reflect the strength and performance of the company value. Command Centers share repurchase plan will not prevent the company from opening new store or pursuing acquisitions.

Command Center sells for 5 times earnings, 6.2 times operating income, and 6.1 times EV/EBITDA. The company's largest competitor sells for 10x EV/EBITDA and if the company sold for 9x its EV/EBITDA would sell for $1.05/share. Command Center currently being undervalued by the market.  The company is well run, has a shareholder friendly management and is profitable. With all of this there is no reason not to see multiple expansion for Command Center.
Published on Nov 3, 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 2020. Content published with author's permission.

Posted in ...