LECG Corp (XPRT)

gameguru (< 20) Submitted: 6/7/2007 11:49:23 PM : Start Price: $15.07 XPRT Score: -58.44

The ticker pun (eXPeRT) alone makes this consulting firm worth a look. The company is essentially a collection of academic, former government, and industry notables who provide independent consulting services across a spectrum of business, regulatory, and litigation issues. Primary service fields are economics and finance (including accounting), followed up by environmental and energy studies, health care services, intellectual property, and other archival research. Customers of the firm often seek advice and reports for use in litigation (the recent options back-dating scandals have kept LECG busy), public policy decisions (i.e., lobbying efforts), and public relations campaigns. The advantages that LECG carries are a reputation of being supremely smart and fiercely independent. Given this reputation, the company comes off as a bit haughty, referring to its directors and principals as Experts (hence the ticker). This comes with a rather loose corporate culture that allows wide latitude and high pay packages, but a recent restructuring effort is aimed at making sure they pay for top performance. With offices across Europe, in Argentina, Mexico, Chile, Australia and New Zealand, the company shows evidence of international diversification and expansion.

The stock price has taken a beating recently, but my fairly pessimistic estimates give a low valuation of about $16-17, with more optimistic assumptions in the $21-22 range. If the restructuring works as planned and growth rates are restored to the high teens, this should easily provide a market-beating return. With a $382M market cap and 13% insider holdings, this firm has both room for and a management interest in continued growth. The 8.7% short interest (about 10 days to cover) could provide a quick upside boost once the restructuring plan shows evidence of working as planned.