Samsonite: A Steal at Current Prices (SAMC)

Mar.28.06 | About: Samsonite Corp. (SAMC)

Michael Markowski Submits: Samsonite (OTCBB: SAMC), the well known U.S luggage and leather company looks interesting. It increased its free cash flow by 309% in its latest twelve months and has grown its annualized free cash flow for eight consecutive quarters after being unable to even generate at least four quarters in a row in the previous 12 quarters.

The company has also generated six consecutive quarters of double-digit revenue growth after going for sixteen consecutive quarters without being able to do so. Despite its best fundamentals and consistency in its last five years its share price is still well below its five year high of approximately $5. The current price at the closing of business on March 28th 2006 was $1.02.

Marc Selley (FreeCashFlow.com) adds: By looking and understanding the graphs below you will see what Michael is talking about.

Below you can see the 5 year operational cash flow [OPS] chart for Samsonite. It is looking the best over the last 3 years.

(Click to enlarge).

SAMC # 1 sm

If you have read our discussion on Cashflow investing and understand how to read the graphs you will understand the 5 year chart does not give us a good enough indication and is only our starting point. ((To learn how to read these graphs, check out our site or our free tutorial).

Next we look at the graph below depicting the last 4 Quarters. You can see Samsonite has the highest rating of a 1.

(Again, click to enlarge. Same for all charts that follow)

SAMC # 2 sm

After looking at the last 4 quarters, we need to look at the 20 quarter charts to really understand the business and to look at quarterly trends year over year.

SAMC # 3 sm

However, the gurus we all try and follow, including Michael, really only concentrate on the following two graphs. It is these graphs that cause Michael's picks to outperform the market year after year and is the reason our portfolios will beat the market year in and year out.

Below is the 5 year free cash flow chart. You can see the free cash (NYSE:FC) yield (the 10th line down) is up 44.9% year over year while the free cash margin percentage is the highest it has ever been.

SAMC # 4 sm

As stated earlier, we also need to look at the 20 quarter chart to get the real picture.

SAMC # 5 sm

SAMC 1-yr chart:

SAMC 1-yr chart

Some additional definitions which be help you to better understand this post: cash flow, free cash flow, and operating cash flow