CASE STUDY: PCS Edventures! (PCSV)

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October 27, 2024

PCS Edventures! (PCSV) offers a large catalog of STEAM curriculum (Science, Technology, Engineering, Art, and Math) and materials in the United States.  Customers are schools and school districts from kindergarten through the collegiate level.  Customers also include providers of after-school programs, home-school programs,  summer programs, and corporate outreach programs.

PSCV differentiates itself in the very fragmented STEAM education market by being more professional and by providing excellent customer service.  Furthermore, the company has demonstrated an ability to create engaging new courseware for kids.  For instance, in 2016 PCSV quickly developed an education drone kit and curriculum when the company saw the drone market develeoping.  And PCSV was one of the first to create a podcasting for kids curriculum and kit.  This capability to speedily adjust and produce content valued by kids has been central to the company’s ability to win market share.

PSCV has many repeat customers.  They’ve also been able to win larger orders from government programs such as the U.S. Air Force Junior ROTC.

Although PSCV’s quarter-to-quarter results can be lumpy, they continue to add more customers on a yearly basis.

The market cap is $31.55 million.

Metrics of cheapness:

    • EV/EBITDA = 6.16
    • P/E = 6.34
    • P/B = 3.58
    • P/CF = 9.75
    • P/S = 3.28

Normalized ROE is 38%, which is sustainable.

The Piotroski F_Score is 8, which is excellent.

Insider ownership is 61.99%, which is outstanding.  Cash is $2.65 million, while debt is only $259k.  Total liabilities to total assets is 7.65%, which is superb.

Intrinsic value scenarios:

    • Low case: If there’s a bear market and/or a recession, the stock could decline.  That would be a buying opportunity.
    • Mid case: The company should have a P/E of at least 12.  That would mean the stock is worth $0.47, which is about 90% higher than today’s $0.25.
    • High case: Arguably, the company should have a P/E of 15.  That would mean the stock is worth $0.59, which is over 135% higher than today’s $0.25.
    • Very high case: The company could maintain its normalized ROE of 38%, in which case the stock could compound for many years.

 RISKS

    • PSCV may not continue to win customers.  This seems unlikely but it’s possible.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time. See the historical chart here: https://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps. Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals. We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio. The size of each position is determined by its rank. Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost). Positions are held for 3 to 5 years unless a stock approachesintrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods. We also aim to outpace the Russell Microcap Index by at least 2% per year (net). The Boole Fund has low fees.

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