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3 Value Ideas from thevalueguys.com

Pop21117 views  2010-08-15 13:57   TagsValue  Ideas  thevalueguys 

3 Value Ideas from thevalueguys.com

Val at TheValueGuys.com podcasts a show every week where he picks three companies from the weeks Value Line. Val has an excellent show and I use the show to learn more about the companies he presents. It can be a good source of Value Ideas and I highly recommend it. Here is an article I wrote about the show.

I am presenting a summary of the show and briefly analyzing the companies he presented. I have only looked at the financials briefly for these companies. Please perform your own due diligence and cross check all the facts and numbers presented below.

Oxford Industries (OXM): $20.44

·         Branded apparel for men and women in US and UK - Tommy Bahama, Ben Sherman are key brands.

·         Market Cap : $338 million , EV : $468 million ( $146 million in LT Debt)

·         $800 million in sales in 2009.

·         Valuation: EV /EBITDA : 6.8; P/E : 16.4, P/FCF: 4.2, EV/ OCF : 5.2; EV/EBIT: 23.3

·         3 analysts covering.

·         2% dividend yield (8% Dividend /FCF)

·         Piotroski score: 7 ; Altman Z score : 1.687

·         Interest coverage : 2x

·         LT Debt reduced from $289 million in 2005 to $146 million TTM.

·         $315 million goodwill write down in 2008.

·         DCF Valuation:  Using 12% discount rate and 2% FCF growth forever, I get a $34 intrinsic value (40% MOS). Attractive valuation even with extremely low valuations.

Carter (CRI): $23.3

·         Children’s clothing brand. Trusted for quality. Sells via own stores and other stores like Target.

·         Owns OshKosh brand.

·         Operates 276 carters and 170 OshKosh stores.

·         Market Cap : $1.39 billion ; EV : $1.37 billion

·         $1600 million in sales TTM

·         ROE 15%; CROIC : 15% +; Op margin: 11% ( 5 year multi-year median values)

·         Balance sheet is strong - Net Cash positive

·         Interest coverage : 15x

·         No dividend payout.

·         Valuation : EV/EBITDA : 5 ; P/E :9.6 ; EV/EBIT: 8 ; EV/ OCF: 7.9 ; P/FCF : 10

·         Piotroski  score: 8 ; Altman Z score : 2.9

·         DCF Valuation:  Using 12% discount rate and 2% FCF growth forever, I get a $24 intrinsic value (3% MOS). Low expectations

TJX Companies (TJX): $40.9

·         Owns TJ Max and Marshalls. 890 T.J.Maxx, 813 Marshalls, 323 HomeGoods stores.

·         Market Cap: $16.7 billion, EV: $15.5 billion.

·         $21 billion in Sales TTM.

·         ROE: 36%, CROIC : 23%; Op Margin: 7%; FCF growth 12% ( 5 year multi-year median values)

·         Balance sheet is strong - Net Cash positive by $1.1 billion

·         Valuation: EV/EBITDA: 5.9 ; P/E : 13 ; EV/ EBIT : 7 ; EV/ OCF : 6.4; P/FCF : 8.7

·         Piotroski score: 8 ; Altman Z score : 3.88

·         Buying back stock over 20 years. Diluted shares outstanding were 578 million in 2000 and stood at only 414 million TTM. (28% reduction in share count). That’s $5.2 billion in share buyback since 2000.

·         Dividend per share went from $0.08 in 2000 to $0.49 TTM. That’s $1 billion in dividends since 2000.

·         Dividend yield: 1.3%. Dividend / FCF : 10.45%

·         DCF Valuation:  Using 12% discount rate and 2% FCF growth forever, I get a $45 intrinsic value (9% MOS). Low expectations

·         Special mention: I have built a spreadsheet that shows me per share values for various metrics such as revenues, EPS, OCF, Capex, FCF, Dividend, Net Cash, Tangible Book Value. I believe this is what Value Line presents as well. Take a look at those for TJX and you will be amazed at the consistent increase in those metrics on a per share level. From 2000 to TTM,

Revenue/ Share: $16 to $50

EPS: $0.93 to $3.15

OCF: $0.96 to $5.88

Capex: $0.44 to $1.24

FCF: $0.52 to $4.65

Dividend: $0.08 to $0.49

Net Cash: ($0.39) to $2.86

Tangible BV: $1.79 to $6.9

 

Conclusion: Of the three companies, I like TJX the most. It has the best balance sheet, high ROE and CROIC, high Piotroski score and low valuation. Val liked TJX a lot as well but went with Oxford (OXM) since he had picked TJX in past shows.

 

Disclosure: I do not have any positions in the above companies at the time of writing this article. My positions may change at any time without any further updates. Please conduct your own research before considering investments based on these or any ideas on this blog. This post is to be considered as my research and not advice or a recommendation to buy or sell any of the stocks discussed. 

 

 

 

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