GEORGE RISK INDUSTRIES, INC. (RSKIA) stock intrinsic value fair value estimate & owner earnings analysis

George Risk Industries makes small, unglamorous parts that go into security systems: magnetic door and window contact switches, glass-break and panic switches, pool-alarm and water-leak sensors, proximity switches, custom keyboards, and (since the October 2017 purchase of Labor Saving Devices) wire and cable installation tools. It builds them in its own plants in Kimball and Gering, Nebraska and sells them mainly through security distributors to alarm installers; about 90% of sales are in the United States. Demand follows residential and commercial construction. Fiscal 2026 (year to April 30, 2026) sales were $24.9 million, up 10%, helped by 5% price increases in February 2025 and January 2026, and income from operations was a record $7.0 million. The company has no borrowings, pays no stock-based compensation, and pays $1.00 a share in dividends each year. The company is really two things: a very profitable little manufacturer and a large pile of cash and securities. We value them separately so nothing is counted twice. The cash flow we credit to the manufacturing business excludes the dividends and interest earned on the portfolio, the $515,000 and $134,000 gains from acquiring discounted solar tax credits in fiscal 2025 and 2026, and $410,000 of unusual other income in fiscal 2026 (which appears to coincide with amended tax returns claiming extra research credits). On that basis the manufacturing business produced cash for its owners of about $0.79 to $1.08 a share in each of fiscal 2021 to 2026, after the equipment spending needed to keep the plants running. We use the middle of those six years, about $0.91 a share, as the normal earning level. Earlier years are left out because the 2017 acquisition, the 2018 federal tax cut and roughly 75% higher sales since 2019 make them a different, smaller business. Fiscal 2026 alone ($1.08) is not used because one strong year is not a normal year, and the first quarter of fiscal 2027 already showed gross margin slipping to 47% from 51% as tariffs raised raw material costs, even though sales rose 16%. Big swings in reported cash flow are mostly inventory and tax-timing movements (inventory rose $3.6 million in fiscal 2023, and $2.2 million went into tax credit purchases in fiscal 2025), which we strip out. The portfolio and spare cash: at April 30, 2026 the company held $5.2 million of cash, $42.3 million of stocks and municipal bonds, and $2.3 million of purchased solar tax credits that will be used instead of paying cash taxes. From that we keep $2.0 million as operating cash and deduct $3.7 million of declared but unclaimed dividends still owed to shareholders and $3.3 million of tax that would be due on the portfolio's unrealized gains. That leaves about $40.7 million, or $8.30 a share. The portfolio is taken at its reported market value in every case; we do not forecast stock market moves. Base case ($27.46): manufacturing cash flow starts from the $0.91 normal level and grows 3% a year for ten years. That growth is the price pass-through the company has repeatedly shown (sales up from $14.1 million in fiscal 2019 to $24.9 million in fiscal 2026 while cost of goods stayed at roughly half of sales throughout), and it is well below the roughly 8% a year sales actually grew. For comparison, manufacturing cash flow per share actually grew about 16% in fiscal 2026; we start lower and slower on purpose because that year looks above normal. After year ten we allow 2% a year for fifteen years and then a flat level for fifteen more, and stop counting after forty years. The reason it can continue that long is the company's own record: it was incorporated in 1967 and has been profitable every year we reviewed, including the weak 2020 year and the 2023 sales dip. New products (wireless contacts, UL-listed high-security switches, explosion-proof contacts) are not credited. The business is worth about $19.16 a share, plus $8.30 of surplus assets, with no debt to subtract. Bear case ($17.05): a housing slowdown (management states security sales move with construction) cuts cash flow to about $0.60 a share for two years, similar to fiscal 2019-2020, before it recovers only to $0.78, the weakest level of the past six years. It stays flat in dollars for ten years, losing ground to inflation as tariffs and labor costs (both cited by management) offset price increases. From year eleven the hardwired contact business shrinks 5% a year for twenty years as alarm systems move to wireless sensors, a shift the company itself is preparing for by developing wireless products. After that we assume nothing is left. Business value is about $8.75 a share plus $8.30 of surplus assets, with nothing owed. Bull case ($37.50): fiscal 2026's $1.08 a share is treated as the new normal, and the company keeps raising prices and volumes so that cash flow grows 5% a year for ten years. That is still below the 8% sales growth and roughly 10% cash flow growth it achieved from fiscal 2019 to 2026. Growth then slows to 3% for fifteen years and 2% for fifteen more. The business is worth about $29.20 a share plus $8.30 of surplus assets. What could make this wrong: a deep construction recession; a faster switch to wireless sensors from larger companies that bypasses hardwired contacts; lasting margin damage from tariffs on raw materials; or a large stock market fall, which would cut the surplus assets directly. On the other side, the company has no debt, has been in business since 1967, and has surplus assets that alone cover about half of the bear case value. The Risk family trusts control about 60% of the shares and the stock trades thinly on the OTC market with a single market maker. Valuable assets can stay ignored for a long time, and management has not used the portfolio for large buybacks. Since our previous analysis we have changed how the business is measured. We now value the manufacturing business separately from the investment income, use one fixed 6% rate in every case, and set out scenarios based on named business drivers rather than different discount rates. That raises our estimates, mainly because the steady manufacturing cash flow is now valued over its full life. Margin-of-safety price: the surplus assets ($8.30) are a solid floor, and the bear case is about $17. The margin-of-safety price is $15.50, slightly below the bear value. From that price, if the shares moved to the base value within about three to five years, the $1.00 annual dividend (about 6.5% at that price) plus the gain implies roughly 20% a year. In the bear case the shares are still backed by the surplus assets and the dividend. The price is not set nearer the base value because thin trading and family control mean the gap between price and value could take years to close.