EVZ and Saunders

Interesting to look together at EVZ and Saunders (SND), as they have a similar activity : building large scale tanks, mainly for fuel and water.

There are very few posts regarding both companies, but they are worth analysing :
- they look really cheap based on free cash flow yield and EV/EBITDA* (2.2 x for EVZ),
- they have a very good financial situation (large net cash positions, excluding lease liabilities),
- both stocks have also a low beta : 0.52 for EVZ and 0.25 for SND.
Useful for microcaps which have a limited liquidity.

Of course, there also differences between the 2 companies.
Saunders has an EBITDA margin twice the level of EVZ (respectively 9.9 % and 4.6 %), while SND revenues are twice the level of EVZ.

There are several potential reasons why valuations look so cheap :
- the low liquidity of both stocks,
- the cyclicity of their business (interesting to note there that EVZ is now increasing its order book, while SND order book is more or less flat),
- and the past troubles of EVZ.

Even if EVZ gave a cautious message for the rest of the year, the stock looks really cheap, with an EV/sales of 11 % vs 54 % for Saunders.
Part of the difference is justified by the margin difference between the 2 companies, but it does not fully explain such a spread between the 2 companies (while Saunders looks also quite cheap).

* using H1 25 EBITDA annualised and net cash excluding lease liabilities