Crown Crafts: A Study in Nano-Cap Outperformance

| About: Crown Crafts, (CRWS)

On Sunday, March 7, I wrote (here) about Crown Crafts' (NASDAQ:CRWS) free cash flow generation. The stock closed on March 8, at $3.41 a share. Since then, the stock has been on a tear, closing at $4.33 last week, for a gain of 26.98%. By comparison, the S&P has been up 6.9% over the same period.

Undervalued nano-caps with quality management teams, such as Crown Crafts, can be extremely lucrative investments, if well chosen. Although institutional money managers often brag about the inefficiencies in the sub-$1 billion market cap space, the real inefficiencies can be found in the sub-$100 million market cap space.

On March 7th, I estimated Crown Crafts's valuation at 3.75X 2009's Free Cash Flow and 4.9X its 8 year average Free Cash Flow.

Even after the recent run-up, it's still cheap compared to the broader market.

Disclosure: No positions.