New Trade for October 6th, 2023

Apprehensions of migrants at the southern U.S. border surpassed 2.3 million in FY2022 (a record high), and that number is expected to continue to climb in the coming years. While this is not great news for U.S. taxpayers, there is a publicly-traded company that stands to benefit as the migrant crisis escalates.

Analysts are just starting to catch onto this cheap stock, with Citron Research recently releasing a bullish report on the company, starting with: “Which company with a P/E of 7 holds the key to one of the most impactful solutions for the migrant crisis?” 

The answer… 

The GEO Group, Inc. (GEO)

The global government secure facilities specialist owns significant prison real estate and an extremely valuable tech platform called BI, which monitors prisoners and illegal migrants. 

BI provides a GPS technology intended to enhance compliance. The electronic monitoring program tracks immigrants and prisoners via cell phones and other electronic devices. GEO has an exclusive five-year contract with ICE  that ends in 2026 but will likely be renewed post-2026. This allows the company to capture 100% of the ICE market for immigrants who are under this system. 

The GEO Group’s owned real estate is estimated to be worth multiples of the current enterprise value in private market transactions and BI could be worth the entire enterprise value in a spin-off or sale of the segment.

The margins are also impressive with 55% EBITDA margins and the company putting up over $270M of EBITDA in 2022 alone from the BI segment. With a share price of $8.09, GEO has a market cap of $903 million and an enterprise value of only $2.7 billion.We think GEO looks cheap, and the pros on Wall Street agree. The analysts covering the stock give a median 12-month target of $15, representing an 88% increase from the current price.

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