I bought Orchids Paper Products Company and Subsidiaries (TIS) earlier this year, back when I had just raised a large sum of cash and was looking for some new ideas to get away from the oil kill zone.
The company stood out as being a very solid business – good cash flow, strong sales, steady as she goes growth, boring business with few new competitors – you know, the kind of company that nobody wants to own.
Here, TIS is holding up very well, and I am quite surprised it is still down at $26 a share.
TIS is relatively small with only $210 million in assets, but it’s a good enough target for me. The shares are worth about $10.42 apiece by my estimation, and are currently going for $26. In the first six months of the year, we’ve seen a big increase in share value, even after issuing new shares, up from about $8.62 as of December 2014.
The companies operations are rewarding shareholders richly as of late. Net sales climbed 40% from the first six months of 2015 over the first six months of 2014. Basic income per share rose to $0.55, up from $0.40 period over period – 37.5% increase, matching the sales growth. Cash from operations is up 59.5%. It looks to me like this is real; not just a financial gimmick.
I had purchased this company in part because I saw an off radar business with solid fundamentals. But I also guessed that TIS would have the opportunity to make a lot of above average returns in the near future, thanks to all the meltdowns in South America leading to scarcity of basic paper products.
I still need to confirm where TIS is shipping product to, but even if that isn’t exactly what’s happened, I seem to be getting a pretty big payoff anyway. The company has a focus on US markets, but there is also some elusion to “Away From Home” sales, following the acquisition of Fabrica in Mexico. Regardless, TIS is growing at a 40% clip for the moment, and management seems eager to keep a fast tempo pace going.
It might be harder to materialize windfall gains than with a bigger company, since it’s unlikely institutional shareholders will come in and bid up the business. But that’s alright, I can get paid with distributions just fine.