This is one of those stocks that investors buy so they can talk trash to their co-workers or attempt to dazel the next door hottie with their investing acumen at the neighborhood cocktail party.

For myself, I looked at the stock and spend some time reading the SEC filings. In the end I decided that it would feel better to just leave my hand in my pants and my mind in Arkansas rather than owning this stock.

But hey! Strokes is strokes whether on the golf course or in Arkansas.

Wax

Adams Resources and Energy, Inc.
Adams Resources and Energy is engaged in the business of crude oil marketing, tank truck transportation of liquid chemicals, and oil and gas exploration and production. Industry peers include Abraxas Petroleum Corporation, The Dana Companies, and Wynne Transport Services.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $45.97, with an initial trailing stop set at $38.98. With a current price of $39.57, upward price movement will find resistance at $41.77 and $42.70, with final resistance found at $43.97. Downward price movement will find no support.

Days to Cover
The most recent days to cover number is 1. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

In the case of Adams Resources and Energy, the company had a deferred tax liability of approximately $3.3 million and recorded a $2.0 million tax benefit, which relates entirely to the remeasurement of deferred tax liabilities to the 21 percent tax rate.

Operating Income
Income unrelated to a company’s day to day operation, such as income tax benefits or income from other sources will distort a company’s earnings and consequently its fair value. Investors need to take the time to explore the quality of a company’s earnings to understand its source. For Adams Resources and Energy 15% of the company’s operating income came from income tax benefits and 0% of operating income came from other sources.

Insider Transactions
In the past 12 months, the company has reported 15 insider trades involving 4,539 shares of stock. Of those 15 insider trades, 13 were Buys involving 3,978 shares of stock, and 2 were Sells involving 561 shares of stock, creating an insider buy to sell ratio of 7.1 to 1.

Mergers/Acquisitions
There were no company mergers or business acquisitions during fiscal 2017.

Divestitures/Dispositions
There were no company divestitures or business dispositions during fiscal 2017.

Year-Over-Year Metrics
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Adams Resources and Energy, revenue increased by 20%, earnings decreased by 12%, free cash flow decreased by 12%, total debt increased by $1.69 million, and the stock price increased by 9%. Year to date the stock price is down 9%.

Future Value
My future (5 year hold) target price for the stock is $62, which is an average annual return of 12%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 5% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $58. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $52. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Other Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, the Price to Book Ratio and the Price to Tangible Book Ratio. For Adams Resources and Energy, the PE Ratio is 9, the PEG Ratio is 0.8, the Price to Book Ratio is 1.13, and the Price to Tangible Book Ratio is 1.13.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Adams Resources and Energy, Inc. (NYSE: AE) – FYE 12/2017 – FAIRLY VALUED The stock is currently trading at levels in line with my most recent $52 fair value estimate. Please See Linked PDF Worksheet

Financial Data
Financial data used in this report was taken from the most recent SEC 10-K filing as reported to the U.S. Securities and Exchange Commission on 03/12/2018 at 17:28:54.

Disclosure
I hold no shares of Adams Resources and Energy, Inc.
Posted on 07/30/18