GSI Group: Liquidation Value

For the past couple of weeks I’ve been reading a new blog I’ve found called Barel Karsan. The title is a combination of the surnames of the two authors. It’s a very good value investing blog with a great number of posts that details the different methods of valuation that are open to investors. It’s really inspiring to me how they have in the past found small, ignored stocks trading at a discount to fair value.

A recent post detailing the steps to take when performing a liquidation value analysis spurred me to perform some searching. I created a spreadsheet to help me do a quick analysis of about 40 stocks I felt had potential to be trading below liquidation value. I found a couple promising stocks, one of which was GSI Group (GSIG). GSI Group supplies precision motion component products, lasers, and laser-based manufacturing systems to electronics, semiconductor, medical, aerospace, and industrial markets worldwide. Some of their stuff has been used on NASA’s Shuttle Discovery!

The following commentary is meant to parallel Barel Karsan’s post on the liquidation value of Amisco. And just to warn any reader, I am not an investment advisor and you should not act upon anything I say without talking to a professional. Now, on to the results of my liquidation value analysis.

I calculated the liquidation value per share to be roughly $6.68. Compared to a current price of $3.6 per share, the discount is about 46%. Looks good, but is it too good to be true? One would have to take a closer look at the balance sheet and cash flows to ensure they are not stepping into a trap. However, I am not able to detect any signs that would point to trouble. Cash has steadily increased, along with operating cash flow and owner earnings. GSIG has a current ratio of 6.79, which is very healthy.

In conclusion, this was a useful exercise for myself. If anyone sees any possible mistakes, please let me know via the comments.