There are certain businesses that often get overlooked because they tend to look ugly at first glance and can sometimes be hard to model. But occasionally, that complexity creates opportunity.
I believe Heritage Global Inc. (NASDAQ: HGBL) is one of those situations. Heritage Global is based in San Diego, CA and is a distressed asset platform that currently trades at less than 70% of book value, 5.5x EV/EBIT and near liquidation value.
At first glance, Heritage Global appears unremarkable: a small-cap asset services business with lumpy earnings and limited coverage.
But a deeper look reveals something more interesting — a multi-segment platform positioned at the center of the distressed asset ecosystem, currently trading at what appears to be a meaningful discount to intrinsic value.
Heritage Global has been profitable every year since 2018, and its business tends to be “counter-cyclical” - meaning it performs better during economic slowdowns. For instance, Heritage earned $0.30 per share (4.3x current price/2020 earnings) in 2020 after the Covid-19 pandemic and $0.42 per share in 2022 (3x current price/2022 earnings) after the Fed aggressively increased interest rates in response to high inflation. Heritage Global has averaged roughly $0.21 per share in earnings over the last 8 years, meaning the stock is trading at just above 6x average earnings.
The company reported $0.10 per share in EPS for 2025 and $0.14 in 2024, which were relatively weak years for the company and why I believe the stock price is currently suppressed. Given the recent geopolitical tensions in the Middle East and the rapid price increase in oil, I believe it’s possible that there could be an economic slowdown on the horizon in which case Heritage Global would benefit.
Heritage Global is currently priced at just 5 - 6x normalized earnings and near liquidation value as I will explain later.
In this article, I will review what Heritage Global does, analyze the company’s balance sheet, provide three valuation models, highlight the main risk with this investment opportunity, and what Heritage Global could be worth if there’s a big slowdown in the U.S. economy.
