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[MikeDDKing]

Here is my EACO DD which I posted on MicroCapClub over the weekend.

EACO Corporation, through its wholly-owned subsidiary, Bisco Industries, Inc., distributes and sells electronic components and fasteners in the United States and Canada. You can learn more about Bisco here:

https://www.biscoind.com/

They also have two more brands that they operate under called National Precision and Fast-Cor as mentioned on their corporate web site which is located here:

http://www.eacocorp.com/

They have a nice video on the Bisco web site which gives you a background on the company. Here is the video:

I am bullish and a shareholder of EACO because they are undergoing a period of rapid growth and in my opinion are undervalued based upon trailing 12 month earnings. Below is a summary of my investment thesis:

History of Revenue and Earnings growth

EACO has a history of increasing revenue and earnings. EPS for the trailing 12 months ignoring one-time items is roughly $0.77/share which implies a PE multiple of only 8. Below is a table showing the annual results:

Year Ending Aug 31st      Revenue        EPS   
 2014                     $134.747M    * $1.14 
 2013                     $120.432M      $0.51 
 2012                     $114.634M      $0.48 
 2011                     $103.467M      $0.42 
 2010                      $91.547M     -$0.30

* Note that there were a few one-time gains in 2014 related to the sale of real-estate which was a discontinued operation. EPS ignoring those gains was roughly $0.64. I haven't studied all of the previous years for one-time items or figured out how to adjust them for the discontinued real-estate business. Nevertheless, this table shows a very good trend.
Impressive Fiscal Q2 Results

The revenue and earnings in the second quarter of fiscal 2015 ending on February 28, 2015 were $34.427M and $0.23/share respectively. This was a big jump from the prior year when they were $30.922M and $0.02/share.

Seasonality

Revenue and earnings of the company have exhibited a seasonal pattern. For the past four years, the May and August quarters have been seasonally stronger. Therefore, the impressive results in the last quarter was in a seasonally weak quarter which bodes well for the coming two quarters.

Bullish Commentary in the Fiscal Q2 Press Release

There were several positive items mentioned in the fiscal Q2 press release. They stated: “The Company has continued to gain market share through its local presence business model. The Company has opened their 46th facility in Fort Lauderdale, FL, on March 16, 2015.” Also, they had record sales. There have been similar comments made in other recent press releases. Here is a link to the Fiscal Q2 press release:

http://finance.yahoo.com/news/eaco-corporation-reports-record-second-200100268.html

Hiring

The company has 42 positions listed on their web site. As of August 31, 2014 they had 426 full-time employees. The job listings represent a 10% increase in employees assuming they fill these positions. Most of these positions are for sales people. The hiring situation was discussed in the most recent press release. Here is a link to the open positions listed on their web site.

https://www.biscoind.com/store?o=jobs

Also, I found a hiring video from October 2014 that speaks to their growth at the beginning. Here is the video:

Strong Balance Sheet

They have a very strong balance sheet with a book value/tangible book value of $4.93/share for common shares and cash of $1.32.

Tiny Float

One unusual thing with EACO is that the float is super tiny. The float contains 79,394 shares as of the last 10-K. The CEO owns slightly more than 98% of the common shares. There are obvious pluses and minuses with this share structure which I will leave to the reader to evaluate. Also, while there are some preferred shares they are only convertible into 40,000 common shares.