Last week, I initiated a search for companies trading at below 2x and 3x net current asset value (NCAV), that were also trading at less than 15x next year’s consensus estimates. At those levels, these companies could be cheap from both an asset and earnings perspective. In this type of volatile market and economy however, there is still a great deal that could go wrong. However, its good to know what is potentially cheap here.
I held out Vera Bradley (VRA) last week as the initial candidate, and wanted to give a brief follow-up prior to revealing another example. VRA released earnings shortly before my column was submitted, however updated balance sheet data was not yet available. Cash increased in the fourth quarter to $88.4 million, or about $2.65 per share up from $75 million/$2.22 per share. In fact, with the updated balance sheet data, VRA now trades at 1.98x NCAV. One other tidbit: the company bought back 650,000 shares during the fourth quarter, at an average price of $8.63.
Also making the cut is Johnson Outdoors (JOUT) , which makes and sells a variety of fishing, camping and other products. Currently trading at 2.87x NCAV, the stock has had a rough run recently. Shares are down 47% over the past year, and 17% year-to-date. JOUT was a $154 stock – an all-time high last April – and closed at $79.22 on Friday.
The company ended its latest quarter with $167.5 million, or $16.59/share in cash and no debt. It has exceeded “consensus” earnings estimates for six consecutive quarters. Last month, the company reported first quarter warnings of $1.07, above the 90-cent estimate. However, there is just one analyst currently covering the company. The estimate for FY 2023 is for earnings per share of $8.54, putting the forward estimate at $9. There are two share classes, the A shares currently pay a 30-cent dividend, which equates to a 1.5% yield. Class B shares are not publicly traded.
JOUT did very well during the pandemic. While revenue has slipped recently (down 7.3% for Q1), that was off of some strong pandemic-era numbers. Inflationary pressures are likely weighing on the company now, including high gas prices.
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