Q: I was watching BNN today (sept 9th) and on market call the guest had this as one of their picks. The guest mentioned that ESI is paying off 600M in debt using free cashflow which they are apparently halfway through doing with a target date of to complete this end of next year. The guest was making the case that after this debt is paid that free cashflow the div could be increased and the company could do a 22% repurchase of the stock outstanding. What is the management of this firm like do they have a track record of success? What do you think of the thesis put forward by this guest. Is this company worth a flyer?
Thanks
Thanks
5i Research Answer:
This thesis is not new. ESI did pay down about $60M in debt in the first half of 2024, but the debt level remains large. Certainly valuation would increase with less financial risk. But if we a sector rollover or a recession there remains lots of risks here. We would not give management high marks for past execution. It has lost money in 7 of the past 9 years. IF debt comes down this may be buyable later. We think buyers have lots of time, and it doesn't have to be 'now', due to the still-present risks.