Lares Capital
Hedge fund manager, small-cap, long/short equity

Crown Crafts: A Cheap Equity With A Hidden Catalyst

Introduction:

Crown Crafts (NASDAQ:CRWS) trades at 8.6 forward P/E ratio, has no debt, and a nice cash stockpile. Not only is the valuation compelling but the company management is paying a 4% dividend and owns about 13% of the company. Yet, somehow, the stock has completely failed to participate in the strong November to present day market rally.

Even assuming stagnant growth, CRWS looks tremendously undervalued based on its multiples by just about any market metric:

Table 1: CRWS multiples (source Bloomberg)

Year 2014 (est.) 2013 (est.) 2012 (act.) P/E 7.73 8.61 9.52 P/Book 1.36 P/Tangible Book 1.41 P/Cash Flow 4.75 P/Free Cash Flow 5.17 EV/Sales 0.49 0.51 0.52 EV/EBITDA 3.73 4.30 4.65 Dividend Yield 4.04 EV/EBIT 4.32 ...
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