Cherokee Inc. (NASDAQ:CHKE) is a 23 employee licensor of trademarked apparel to distributors worldwide. The company was founded in 1988 and licenses its apparel brands including Cherokee, Sideout, Liz Lange and many others to retailers in 40 countries. These brands generate gross sales of over $2 billion annually and CHKE earns a portion of those revenues as licensing fees. The company has no manufacturing, supply chain or retail expenditures as it is solely a licensor and bears no inventory risk. This means that Cherokee's business costs very little to run and free cash flow yield as a percentage of revenue is very high. I will argue in this article that, after CHKE's precipitous fall during the financial crisis,...
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