STAN: Standard Parking in a Good Spot?

My latest column is up at RealMoney. It marks the last of a several part “wallflower” series on stocks with limited analyst coverage on Wall Street.

Standard Parking (STAN) is a leading national provider of parking facility management services. It provides on-site management services at multilevel and surface parking facilities for all major markets of the parking industry. Its properties span 2,100 locations, containing over one million parking spaces, in over 330 cities across the U.S. and Canada.

The company grows both by acquisitions and by winning new contracts. In the first quarter, Standard Parking completed the acquisition of Chicago’s GO Parking. Recent business wins include valet and self-parking services at the Trump International Hotel and Towers in Chicago and the parking operations at five facilities in Queens, New York, by the Greater Jamaica Development Corp.

Furthermore, because the company offers a wide range of services, it can often expand the business opportunities at the locations it acquires. As an example, management noted on the recent earnings conference call that “if it’s a hotel that we’re running, can we run the shuttle to the airport for them, which we just did in a couple cases for some of the hotels that we got in one of the acquisitions.”

With a 46% return on equity and no dividend, the company should be able to sustain its current growth rate in earnings per share by a combination of investing in new growth opportunities and continuing to buy back shares. Even after making an allowance for potential contraction in valuation levels (10 times book value seems a bit steep to me), the stock could return 20% or more annually over the next three to five years.

However, the tiny float makes this a very risky play, as one or more large institutional investors trying to sell would likely flood the market.

Disclosure: At the time of publication, William Trent has no financial position in the companies mentioned in this article.