COHN

On the surface COHN looks absurdly cheap: a 3.0x P/E on FY2025 diluted EPS of $4.35, 0.1x sales, ROE of 28.3%, and a $13.12 price sitting well below the ~$20.9 book value implied by $51.1M equity over 2.45M shares. FY2025 was a genuine banner year — revenue up 246% to $276M, operating income up 840% to $59.4M, net income swinging to $14.4M from essentially breakeven, and operating cash flow of $27.4M funding a $2.13M dividend. Management is doing the right things with the windfall, and the stock trades at a discount to a currently-profitable, dividend-paying book.

The problem is durability, and the filing all but tells you not to trust the trailing multiple. MD&A states outright that the Capital Markets segment 'do[es] not produce predictable earnings' and that results 'vary dramatically from year-to-year.' The five-year record proves it: revenue whipsawed $146M → $44.4M → $83.0M → $79.6M → $276M, with net losses in FY2022–FY2024 and a still-negative accumulated deficit of -$26.6M despite this year's profit. The 21.6% operating margin collapses to a 5.2% net margin, and EPS of $4.35 on 2.45M shares captures only ~$10.7M of the $14.4M net income — the rest leaks to non-controlling interests in the operating LLC, so shareholders own a slice, not all, of that $59.4M operating income. Capitalizing peak-cycle earnings here is a trap.