CGO pays a yield of 5.6%, trades at a cheap valuation of 5.7X forward earnings, but it has seen its net profit margins contract from ~6% in FY2018 to ~3% currently, all while sales grew modestly around 6% annually. The company generates a decent level of free cash flows, more than enough to service its dividend payments, however, it has a growing debt balance due to acquisition costs. For a company that uses the majority of its free cash flow and takes on debt to fund acquisitions, its revenue growth is quite minimal. Our primary concern is that it continues to see margins contract and its debt balance to expand as it makes further acquisitions. If the company can stabilize its margins and begin reducing some of its debt load, we can see its share price increasing, but at this point in time, we would prefer to wait until further clarity around its operations before stepping in.
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