Franklin Covey Co. (NYSE:FC)

XMFConnor (97.27) Submitted: 6/23/2011 2:47:45 PM : Start Price: $7.90 FC Score: +53.18

FC is an undervalued, underfollowed name that is in a period of transition. It is about to see rapid growth in FCF as their international licensee revenue continues to expand, which almost 100% of it translates into FCF. Furthermore, the company's Client Partners is expected to double and they represent an excellent ROI for FC.

The analyst from Credit Suisse, James DeYoung, sums up the opportunity well by saying,

“If there are accretive acquisitions to be made, that's a better use for the cash, I'm all for it. I'm just sitting here looking at a business that's trading at 3.7 times enterprise value to EBITDA on next year's numbers and 5.5 times free cash flow to enterprise value. So, just makes no sense when you look at the comps and we're growing faster than the comps."

Below, I have valued the International Licensee business all by itself. I think that it is worth the entire market cap of the company.. which means you get the rest of the business for free (the terminal rate assumes a 12.5X exit multiple, which is pretty conservative for a fast-growing licensee business). This is one of my highest conviction picks over the next three years.

2010 2011 2012 2013 2014 2015 2016

Growth Rate 12% 12% 12% 12% 12% 12%
International License Royalties 9.2 10.3 11.5 12.9 14.5 16.2 18.2
Tax Rate 40% 40% 40% 40% 40% 40%
FCF 6.2 6.9 7.8 8.7 9.7 10.9

NPV 34.18
Terminal 108.96

Value 143.14

speedclimb (< 20) Submitted: 4/2/2010 2:23:03 PM : Start Price: $7.71 FC Score: +40.67

FranklinCovey is adjusting to the changes in market factors and adapting marketing strategies which include social networking like the www.StephenCovey.com community.

Dobbes (< 20) Submitted: 1/8/2010 2:53:34 PM : Start Price: $6.26 FC Score: -76.89

Franklin Covey has always been a laggard it seems.

Equity holders are being elbowed out as 2009 was the second year in a row that total liabilities were higher than total equity. Additional debt financing will be costly under this capital structure and it will be difficult for the firm to find the financing required to grow.

Growth however, is the last thing the stock seems to plan on doing. Net income has been negative in the past 7 of 10 years with negative operating income in 5 of the past 10 years. Revenue streams are steadily eroding as the Covey brand continues to lose steam from its blockbuster business books of yesteryear. By almost any measure the firm is shrinking like winter caps in the dryer.

Whats more is the falloff has begun to accelerate in the past 3 years. Revenues have committed hari kari since 2007.
With their most recent fiscal year end, accounts payable is higher than cash and cash equivalents for the second time in the past 3 years. Given that there is a very real chance at posting a negative operating income even in good economic conditions, the fact that there is not enough cash on hand to pay suppliers can be a very real and imminent cause of financial stress for the company. I just don't see the story ending well...

cinnywoo2001 (92.05) Submitted: 12/28/2007 10:46:33 PM : Start Price: $7.69 FC Score: +64.05

Best Niche Office Supply vendor--staff always knowledgable and web site is easy to work.

nkecskes (< 20) Submitted: 2/18/2007 8:13:13 PM : Start Price: $7.30 FC Score: +70.33

It a other one that has gone up since I bought it at 6.89.

jmaykey (96.11) Submitted: 2/13/2007 10:44:30 PM : Start Price: $7.25 FC Score: +71.02

Up on heavy volume last 2 days. Possible breakout above 7.25. MSN Stockscouter Rating = 10. Buy at open tomorrow.

rogerbecker1 (< 20) Submitted: 1/4/2007 12:12:13 AM : Start Price: $6.90 FC Score: +77.73

people will stop wishing, and start getting organized

contraguy (47.63) Submitted: 11/6/2006 10:30:06 PM : Start Price: $5.73 FC Score: +116.48

Daytimers are not dead!