A Rare Chance to Buy a Small-Cap Known the World Over

There are few occasions when investors have an opportunity to own a global brand name at a substantial discount. There are exceptions, but a company whose name has become synonymous with its product is usually the kind of stock that makes for a great core holding, providing stability in difficult times.

But when the market discounts a global brand by -30% from its high, it presents an opportunity that cannot be dismissed. We're seeing that with Brink's Company (NYSE: BCO) today.

The Brink's name has become synonymous with security, going as far back as 1838. Next time you see an armored car outside a bank, note the name. The odds are very high it'll be a Brink's truck. The company provides secure transportation, cash logistics and other security-related services to banks and financial institutions, as well as retailers, government agencies, mints, jewelers and other commercial operations.

The market kindly discounted Brinks in the summer of 2008 when the company announced a spinoff of its home security business. Investors took the stock down from $70 to $40 in less than two months.

Today, Brink's has become a leaner operation. The company sold off its natural resource division, a portion of the business that never made much sense anyway. And after completing the spinoff, the newly-formed Brink's Home Security was scooped up a year later by Tyco International (NYSE: TYC).

The thing holding Brink's back is the same thing holding just about everyone back: the economy. Earnings were severely hampered, down -75% in the first quarter on flat revenue. This kind of performance would normally give any investor plenty of cause for concern. However, there are several factors which mitigate these results and are the reasons Brink's is a value play today.

First, as mentioned, the economy stinks. But it will improve, and a global brand is likely to improve with it, provided it survives the downturn. So the next step is to examine company financials to see if this will be possible. In Brink's case, the company carries $201 million in debt and $132 million in cash. This disparity is only cause for concern if Brink's is having trouble servicing that debt.

Investors can breathe a sigh of relief on that front by looking at the income statement. Brink's only pays $11 million in interest annually on that debt, just about 5.5%, which is a very reasonable rate. This past quarter, the company's worst in some time, still showed operating profits of $24 million -- so there's no worry about debt service. This past quarter wasn't great for cash flow, as Brinks only generated $5 million, compared to $175 million combined in the previous three quarters. Again, however, this is not a concern unless Brink's cash flow repeatedly goes negative.

Is this a possibility? Analysts don't think so -- they are predicting +23% earnings growth to $1.77 a share in 2011. For those who would put an earnings multiple of 20 to that number (to reflect the forward earnings growth) Brink's could be looking at a $36 share price, or a +60% return from here. When combining the last traded price of Brink's Home Security prior to the Tyco buyout and Brinks' stock price today, it comes in -30% below its all time high. By any measure then, the stock seems undervalued.

Investors looking to see if Brinks is still held in high regard by other investors need seek no further than the mutual fund industry. 35% of the shares are held by these funds, including such names as Fidelity, Vanguard and Morgan Stanley. That's a solid show of support.

Action to Take--> Overall, this is a good opportunity to own a global brand name at a discounted price. When the economy picks up, investors could see outsized returns.

http://www.brinkscompany.com/

http://www.google.com/finance?q=NYSE:BCO