PhenixFIN: Undervalued Assets, Insider Confidence, and Hidden Tax Benefits Signal Buying Opportunity

PhenixFIN Co. (NYSE:PFX) presents a compelling investment case for value-oriented investors. With its shares trading at a significant discount to book value, recent insider buying signaling confidence in the company's prospects, and underappreciated deferred tax assets, PFX offers a rare confluence of factors that suggest it is undervalued and poised for appreciation. Let's break down the opportunities and risks.

The Undervaluation Case: A 38% Discount to Book Value

PhenixFIN's stock closed at $49.89 on June 19, 2025, while its book value per share stands at $80.59 as of the latest filings. This results in a Price-to-Book (P/B) ratio of just 0.62, a stark discount to its peers and historical averages. For context, the stock's trailing 12-month P/B ratio is 0.62, and its five-year average is 0.59, suggesting the market has consistently undervalued the company.

The gap between price and book value is particularly intriguing given PhenixFIN's role as a Business Development Company (BDC) focused on debt and equity investments in small- and mid-market firms. Its portfolio spans sectors like healthcare, real estate, and manufacturing—areas with strong long-term growth potential. The market's reluctance to price these assets fully into the stock creates an opportunity.

Insider Buying: A Bullish Signal from Those Who Know

Insiders have been active buyers of PFX shares at current levels. CEO David A. Lorber, for instance, purchased 700 shares on June 16 at $47.91, increasing his stake to 142,845 shares. This transaction, coupled with broader insider purchases totaling $1.1 million over the past two years, sends a clear message: insiders believe the stock is undervalued.

Notably, Lorber alone has invested $998,098 in PFX shares during this period, demonstrating significant “skin in the game.” When combined with the 24.4% insider ownership, this alignment of interests between management and shareholders reduces agency risks and reinforces the case for confidence in PFX's fundamentals.

Hidden Tax Assets: An Overlooked Value Driver

While often overlooked by investors, PhenixFIN's deferred tax asset represents a potential catalyst for revaluation. As of December 31, 2024, the company reported a $887,099 deferred tax asset, consistent with prior quarters. This asset arises from temporary differences between book and tax accounting, such as deductions that can be applied to future taxable income.

Though the asset has not been fully utilized yet, its existence suggests that PhenixFIN may benefit from tax savings in coming years—savings that could boost earnings and reduce capital costs. The market's neglect of this asset likely contributes to the current undervaluation. Once recognized, this could narrow the P/B discount and drive upward re-pricing.

Risks to Consider

• Low Trading Volume: PFX's average daily volume of 1,965 shares is modest, increasing liquidity risk. A sudden sell-off could amplify volatility.
• Sector-Specific Risks: As a BDC, PhenixFIN's performance is tied to its portfolio companies. Weakness in sectors like real estate or healthcare could pressure earnings.
• Debt Exposure: With a debt-to-equity ratio of 0.87, the company's leverage leaves it vulnerable to rising interest rates or credit downgrades.

Investment Thesis and Action Steps

• Buy the Discount: Investors should consider initiating a position in PFX at current levels, especially if they believe the market will eventually recognize the $80.59 book value and deferred tax benefits.
• Average In: Given the low volume, dollar-cost averaging reduces execution risk.
• Monitor Tax Asset Realization: Track quarterly filings for updates on deferred tax utilization, which could accelerate revaluation.

Conclusion

PhenixFIN's combination of insider confidence, substantial book value, and untapped tax assets positions it as a compelling value play. While risks like low liquidity and sector exposure exist, the alignment of insiders' interests and the undervaluation discount make PFX a stock worth considering. Investors seeking exposure to a BDC with a potential catalyst should take note—this could be a rare opportunity to buy financial strength at a discount.

As always, consult your financial advisor before making investment decisions.