CPI Card Group (PMTS), mcap=$204m, price $17 vs $15

Pitch: Payment card manufacturer trading at a deeply discounted 6xEBITDA and 6xFCF valuation. Left for dead by the investment community after some management missteps, which have been fixed. 40% market share of domestic cards – a reasonably good industry with moderate growth, 90% of demand from card replacement. Debt refinancing and a potential sale of the company could be catalysts. A number of competitors have been acquired over the years at higher multiples.

Valuation: Given moderate recurring growth and the ability to finally de-leverage the balance sheet, 10x FCF seems appropriate, leading to a roughly $20 – $30 stock price and almost 100% upside.

Exp. gain: 100% upside to $30/share.

Full PMTS write-up (free guest account required):

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