KSW, for a number of years, has had a good clean balance sheet, with plenty of liquidity and hardly any debts. Currently the one long term liability is a mortgage for an amount but a fraction of cash on hand. The current ratio (current assets to current liabilities) is just under 2, meaning the company has plenty of liquidity to cover business needs. Cash and marketable securities add up to $2.68 per share. The company trades at less than 1.5 times cash. The strong balance sheet has been consistent over the time frame I have followed the company.
The second highlight of KSW is a consistent disclosure of the backlog outstanding in each quarterly report. The company has done an excellent job of keeping investors updated on current backlog and describing the work done under the contracts as they receive them. On the company website is a list of current projects. This leaves investors with less uncertainty. From the most recent quarterly release "The Company's backlog as of June 30, 2012 was approximately $74,600,000, which does not include a recently awarded contract for a 33-story residential building located on Manhattan's West Side, valued at approximately $10,000,000." This compares to second quarter revenue around $25 million, clearly illustrating the company has a reasonable amount of bookings to perform work on over the next few quarters.
Lastly, the company has done a great job of consistently turning a profit, even in quarters with lackluster sales. This is a result of low overhead and almost all of their income statement being wrapped up in the projects themselves. Here are the quarterly results for the last six quarters:
| Year over year revenue comparisons in millions | |||
| current | previous | ||
| 1st quarter 2011 | $ 16.55 | $ 13.46 | 23% |
| 2nd quarter 2011 | $ 17.43 | $ 24.44 | -29% |
| 3rd quarter 2011 | $ 16.17 | $ 21.12 | -23% |
| 4th quarter 2011 | $ 19.13 | $ 17.28 | 11% |
| 1st quarter 2012 | $ 21.46 | $ 16.55 | 30% |
| 2nd quarter 2012 | $ 25.34 | $ 17.43 | 45% |
| Year over year EPS comparisons | |||
| current | previous | ||
| 1st quarter 2011 | $ 0.05 | $ 0.01 | 400% |
| 2nd quarter 2011 | $ 0.07 | $ 0.12 | -42% |
| 3rd quarter 2011 | $ 0.03 | $ 0.11 | -73% |
| 4th quarter 2011 | $ 0.09 | $ 0.07 | 29% |
| 1st quarter 2012 | $ 0.11 | $ 0.05 | 120% |
| 2nd quarter 2012 | $ 0.09 | $ 0.07 | 29% |
As you can see, the company does not exactly have consistent year over year earnings and sales growth, but even when sales declined year over year the company still turned a profit. This has been a theme for the vast majority of the time I have followed the company. After the financial problems of the US in 2008-2009 the company did struggle to turn profit as money for large HVAC contracts dried up. However, the rest of my experience watching KSW leads me to believe absent extenuating circumstances, the company will turn a profit.
Currently KSW trades at a PE around 12. Not too high, not real low. The company has a very strong balance sheet and a well document and high backlog number. From a fundamentals perspective, the company looks pretty cheap. From a technical perspective, things could get interesting if it goes above $4.
I currently own no shares but if I had free cash I would consider buying some.
Happy investing all!
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