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I launched my "By the Numbers" column last month with a post on a retailer trading at a dirt cheap price with turnaround potential. As a reminder, 'by the numbers' means that I'll be focusing on financial metrics of the stock as part of a first-pass analysis. Don't think of this as a stock recommendation or a full review, but as the beginning of an investment thesis.

Sticking to the theme of cheap retail, fashion company Kenneth Cole Productions (NYSE:KCP) caught my eye. It's a small cap company with a market capitalization of $363 million. The beauty is that KCP is sitting on $120 million in cash and marketable securities with no debt. In addition, Kenneth Cole sells much of its accounts receivable to factors (without recourse) and lists $30 million as due from factors and another $15 million in net accounts receivable on its June 30, 2007 balance sheet.

I don't know what the company will do with all its cash. Raising the already generous dividend is one possibility. The current yield is a remarkable bank-like 4%. Acquisitions are another possibility--it acquired Le Tigre assets last month (remember the tiger logo?).

The company is trading at 15.2x trailing earnings and 6.8x operating cashflow, but would be closer to 10.2x earnings and 4.6x cashflow if you use an enterprise value multiple (and didn't adjust the denominator, even though you really should). It's also priced at 5.5x EBITDA and 1.4x book value. Historical valuation data at Morningstar shows trailing twelve month multiples for earnings, book value, sales, and cashflow at the cheapest level in 10 years.

A few other observations: sales have grown rather steadily over the past decade, shares outstanding have been constant since 2000, the stock is down big from its 52 week high and pennies away from a new low, and operating margins in the high single digits are OK but not great.

Mr. Kenneth Cole controls the company with about 90% of the voting power through ownership of both Class A and Class B shares. If you think he'll do a good job growing profits and putting the balance sheet to work, then consider digging past the numbers and learning the full KCP story.

Disclosure: At this time I own a Kenneth Cole suit, but have no position in its stock.

Source: Kenneth Cole Stock: By The Numbers