While reading the headline of this story, you must have felt full of joy if you are invested in Quindell (LSE: QPP) at a much higher price than 128p a share.At least theres hope, you might have thought.
Most likely, thatsbecause you truly believe, in spite of all the ups and downs in recent months, that whats left of Quindell after the divestment of its core Professional Services Division (PSD) to Slater and Gordoncouldstill represent good value formoney.
Frankly, I dont know if thats the case. In fact, many elements suggest that you might be wrong but just how wrong could you be betting on a stock that, at 128p a share, is a punt on the unknown at present time?
Quindells new business is being valued at zero pence a share right now, simply because its current equity value equates to the amount of cash that the company plans to return to its shareholders.
So itsnever been easier to invest in Quindellover the last 12 to 18 months, Id argue but it comes with caveats.
Whats Left Of Quindell
Its new management team, first: is there one in place now that should be trusted after months of tiptoeing around the truth?
When it announced the completionthe sale of PSD on May 29, Quindell also announced the new team, made upof a few non-executive directors that joined the board currently led by Richard Rose, who is non-executive chairman. It appears to be a decent mix and blend of expertise across several fields, with appealing political connections.
If Quindell finds the right man to lead the show its actively seeking a new chief executive then it could be just the right time to bet on whats left of its portfolio, namely: a) connected car and telematics; b)insurance claims management systems; c) andinsurance brokerage, which has a technology and telematicsslant.
The New Quindell
We dont have any element nothing to value the new Quindell, but lets have a best guess to determine what it takes to believe in it.
As an asset-light business, the new Quindell must generate hefty margins and a steep growth rate to justify a lofty valuation on the stock exchange. So, assuming that it can turn over 200m in year 1 and 600m in year 2, for adjusted operating cash flow of 60m and 180m, its enterprise value could easily be worth between 1.2bn and 3.6bn, for an implied share price of between 270p and 810p a share, assuming no debts and a constant number of shares outstanding (444m).
Thats the kind of performance you should expect if you have been invested since the old Quindell hit its record high in the spring of 2014.
If you are looking for alternatives, though, do not waste any time and learn more aboutour top 10 value stocks, whose names aredisclosed here.With most of them, you’ll risk less than with Quindell, and you will unlikely be disappointed by growth and income. I particularly like anengineering services business, which I flagged earlier this year, and whose performance reads +20% since 30 March. It’s still rather cheap, and you’d do well to snap it up before it reports full-year results at the end of July!