Liberated Syndication (LSYN)
I closed out this recommendation earlier in April 2018 at a price of $1.57 (closing price today was $1.60). From the time of my initial recommendation in December 2016, LSYN’s stock price increased 257% from $0.44 to $1.57.
For full details on why I’m closing out my recommendation, see my recent post:
In short, LSYN recently made a bad acquisition and the stock isn’t that cheap on a pro-forma basis. Further, management compensation is egregious and will likely continue to be egregious going forward. I was willing to accept this when the stock was trading at 1.8x EBITDA, but I’m not as willing now that the stock is trading at 6.7x EBITDA. On the positive side, management has started promoting the stock (management recently launched a new investor relations website, is now issuing press releases to highlight positive news, and just held its first quarterly conference call). Further, management announced on the call that it expects the stock to up-list to the NASDAQ exchange by the end of the year (this was expected but the confirmation is a positive). The up-listing will be a significant catalyst.
Nonetheless, I believe the easy money has been made and I’m moving on. This isn’t an urgent recommendation to sell, but I would recommend taking advantage of strength to wind down positions.
I originally recommended NVTR shortly after it was spun off in April 2016 at a price of $6.86.
You can read my original recommendation here:
Two years later, I’m closing out my recommendation on Nuvectra at its current price $13.97 (closing price as of April 18, 2018), for a 104% return.
When I originally recommended NVTR, it had $67.6MM of net cash on its balance sheet and a market cap of $70.5MM. It had been spun off from Integer Holdings (fka Greatbatch), a much larger parent company and had been sold indiscriminately. Prior to the spin off, Integer Holdings had spent ~$125MM developing the products and IP protection (over 150 patents) that would make up Nuvectra. The management team was (and still is) top notch and heavily incentivized through stock options to grow shareholder value. Nuvectra had recently launched an innovative med tech device (Algovita) that was growing exponentially. In short, it was a great set up.
What is the outlook today? Well the company has executed very well and the outlook remains strong.
Revenue in 2017 increased 154% y/y to $30.3MM driven by strong Algovita product sales. Algovita revenue increased 514% y/y to $25.6MM in 2017. In Q4 2017, Algovita revenue increased 65% sequentially to $10.4MM ($41.6MM on an annualized basis).
Additionally, earlier in 2018 Nuvectra completed a secondary equity offering and has enough cash and liquidity to reach well into 2019. Further, JMP recently initiated at “Outperform” while Piper Jaffray upgraded its rating in March to “Outperform.” While NVTR’s fundamentals are strong, its stock price reflects (at least partially) that optimism. When I originally recommended the stock, it was trading an enterprise value of $2.9MM and traded at an EV / forward revenue multiple of 0.2x. Today it has an enterprise value of $167MM and an EV / 2018 revenue multiple of 3.2x. To be clear, there could be significant upside from today’s levels. For instance, Nevro Corp (NVRO), a high flying med tech med peer, is trading at an EV / 2018 revenue of 6.5x, implying that NVTR has room to run. However, NVTR isn’t as obvious of a Buy as when I originally recommended it. As such, I’m closing out my recommendation and locking in a 104% gain over a roughly two-year period.
Stay tuned for addition updates on AFI and APVO (my two other recommendations). Want additional stock spin-off recommendations? Don’t worry – we have a lot of new content that we will be sharing over the next month or so.
Note I still own positions in LSYN and NVTR but plan to gradually sell down as liquidity opportunities present themselves. All expressions of opinion are subject to change without notice, and I do not undertake to update or supplement this report or any of the information contained herein. I have no business relationship with any company whose stock is mentioned in this article. This article is provided for informational purposes only. Please do your own work before buying or selling any stock mentioned on www.stockspinoffinvesting.com.