Okay so I’ve been going through screens like 52 week low lists, percentage losers, volume leaders and dare I say it technically undervalued lists.
One thing that surprises me are the pockets of value still available to diligent investors who are prepared to get their hands dirty.
CA Inc (NASDAQ: CA) is a case in point.
This is a company that has reported eight consecutive quarters of falling revenue, has recently finished a year of restructuring and is being sued by the US government for allegedly overcharging them:
The Justice Department alleges CA, formerly known as Computer Associates International Inc., gave government contracting officers incomplete and inaccurate information during contract extension negotiations, including failing to disclose and pass on to the government higher discounts it was offering to commercial customers and miscalculating price comparisons, resulting in the government’s overpaying.
This is lovely because it means that CA Inc is going through the kind of mayhem that bargain hunters come to expect when looking for undervalued stocks.
I’ve had a good look at this puppy and yes it’s share price has been in decline in tandem with it’s woes but I can’t help feeling there is more to come:
Subscription and maintenance revenue, the company’s biggest topline contributor, fell 2.2% to $925 million. The company’s much-smaller revenue drivers–professional services and software fees–also declined in the quarter.
I could be wrong however but being wrong is an occupational hazard I accepted a long time ago.
CA Inc’s stock could bounce from today’s share price of $29.50 back to it’s all-time highs of $35 a share.
I’m not in the business of fortune telling but what I can tell is that although CA Inc keeps topping analyst expectations on revenue the trend is falling and market jitters are exacerbated by the litigation.
The thing about litigation is nobody knows when it will end (proceedings against CA Inc started August 2009) and the initial charge against the company if found guilty is anyone’s guess.
Last year, CA agreed to pay $11 million to settle unrelated claims it had overcharged customers, including school districts and law enforcement agencies in New York and seven other states as well as the District of Columbia and the federal government, for software maintenance and servicing plans between 2001 and 2009.
In response CA Inc have initiated a $1 billion share repurchase program over a three year period but it needs to say and do more for me to take a position at today’s prices.
This one’s for The Watchlist.