Ambassador's Group (EPAX)

Ambassador's Group (EPAX)

The company earns on average between 30% & 40% on equity and have never really had any debt. Earnings, Sales, and CF have all grown at 17% (previous 5 years). They pay out a large portion of earnings as dividends. They have never lost money, and the lowest return on equity was 20%-though their record is only 7 years.

It's a small issue, market cap only, $158 million.

AND FOR THE KICKER: They have $100 million in muni's and cash, NO DEBT. The only Tangible assets consist of a $24 million building that is their headquarters, but it looks as though they did as lease-back.

The company is Ambassadors Group, inc.(symbol EPAX), they are in the business of providing educational travel programs for students, athletes and professionals.

A large portion of their current liabilities are in the form of "participant deposits" which are more like an unearned premium reserve, not a liability (i.e. "float").

The relatively large 2007 Capital Expenditure was for the purchase of a building that serves as their headquarters.

They also made an acquisition this year and paid out $8.7 mil in cash.

Management stated in their most recent conference call that the number of 2009 participants is (don’t remember the actual number) pretty good-but also that people can still get a refund. I expect that they will have a decrease in the number of “participants” next year though even if they were to go back to the earnings level in 2000 they would still be earning good return.

The only real issue is that last year a boy died while hiking Mt. Figi. He was diabetic. The family is suing for wrongful death and the trial will take place in late 2009. Based upon what I know about tort law, which is certainly limited, I don’t see how the company would be liable for more than a few million-which would be fine. The only question is how this will affect their image-so far it hasn’t.

As of December ‘07 there where only 68 shareholders (not including management and board members). I suppose those that do follow them are concerned with the declining participant enrollment, and partly also the law suit.

What I don’t like are the option grants. Compensation is also somewhat high, but at the end of the day they have been earning very high returns for investors.