TM editors' note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

ALJ Regional Holdings (OTCPK:ALJJ) recently announced its earnings performance for the first quarter ended December 31, 2015, and the results suggest that its stock may continue to be a bargain.

Building A Diverse Group of Businesses

ALJ Regional Holdings provides outsourcing and other services to government and commercial entities in the utility, healthcare, transportation and toll industries. The company is comprised of three completely different segments created through acquisitions: Faneuil, Carpets, and Phoenix. ALJJ Acquired Faneuil in October 2013, Carpets in April, 2014, and Phoenix in August 2015.

However, ALJ Holdings started in the steel industry. In 2003, ALJJ invested $125,000 for a 1.00 percent membership interest in KES Holdings LLC, which was created to purchase assets of Kentucky Electric Steel, comprised of a steel mini-mill. KES had existed for close to 40 years, but had fallen into bankruptcy in 2003 after shutting down the mill. KES acquired the mills assets and renovated the site, restarting operations in 2004. The mill operated profitably, and ALJ increased its stake in KES to 80 percent and eventually sold it in 2013 for $112.5 million for a profit of $87.5 million.

In order to acquire Phoenix, ALJ Holdings had to finance the deal, which put $125 million in debt onto the balance sheet versus $3 million in cash.

Despite this, the company's management may be able to turn each of its three businesses into profitable endeavors such as it did with KES.

Another factor that may interest investors is the stake that billionaire investor Ronald Perelman has in ALJ Holdings. ALJJ acquired Faneuil from Harland Clark, a wholly owned subsidiary of MacAndrews & Forbes Holdings Inc, which is wholly owned by Mr. Perelman. In the sale of Faneuil, Mr. Perelman acquired 3 million shares of ALJ Regional Holdings representing 10 percent of the company.

A Deeper Dive Into Three Main Units

The Phoenix division manufactures educational materials, books and other related products that provide value-added features such as illustrated books and specialty commercial products. Their product portfolio also includes specialty manufacturing products, such as folders, blades, collectible cards, postcards, posters, box wraps, game boards, labels and folding carton solutions.

As the largest provider of floor coverings in Las Vegas, Nevada, the Carpets division markets floor coverings, such as carpets, laminates, hardwood, ceramic, tiles, natural stone, porcelain, area rugs, and vinyl planks and tiles, in addition to specialty materials including cork, leather, bamboo, and large tiles to commercial and retail consumers. Their product portfolio offers countertop materials for bathrooms and kitchens; organizers for bathroom, kitchen and garage cabinets; bathroom, kitchen and garage cabinets; and window coverings comprised of shutters, blinds and shades.

Finally, the Faneuil division provides fulfillment operations, customer contact centers, and information technology services. In addition, they offer other services including medical device tracking, violation processing, and manual and electronic toll collection. This division also provides billing, payment, and claims processing; customer relationship management; document management; data entry; workforce and support analytics; operational expertise; and office support and staffing services.

Positive Stock Performance, Currently At An Attractive Value

The company's stock price has fluctuated dramatically over the last 12 months, reaching a low of $3.81 on July 8, 2015, and gaining significant ground to rise to $5.15 on November 6, for an increase of 35 percent. The S&P 500 is down 5.73 percent year-to-date by comparison.

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(Nasdaq.com)

Conclusion: Buying Opportunity

We are optimistic on ALJJ's long-term growth, boosted by its recent results and an upward market turn.

Financial highlights for Q1 include:

• Revenue increasing to $64.8 million compared to $49.9 million from the prior year (+29.8 percent).
• Adjusted EBITDA of $5.8 million versus $4.9 million from the prior year, an increase of 18.3 percent.

While ALJJ does face a competitive set of peers, its diversified businesses set it apart and keep it relatively flexible.

Investors should strongly consider taking and/or building on an existing position in ALJJ at this value.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.