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  • Getting Long BBBY @ $63.80 0 comments
    Apr 10, 2014 10:21 AM | about stocks: BBBY

    BBBY missed earnings after the close last night. Stock is down 6% this morning. Comparable sales are stable to positive and the net sales decrease is distorted by the 53rd week in the comparable prior year's quarter.

    With a generous Adjusted Free Cashflow Yield (EV based) of 9.1%, and an aggressive buyback programme set to continue over the next 12 months, which should equate to 9% of the current share count, the stock should outperform the market.

    Going forward the stock should be able to generate 5.7% earnings growth from reinvested earnings and 5.1% earnings growth from buybacks net of stock compensation dilutions. There is a certain cyclicality to this business and therefore slightly weakening EBITDA margins trends due to aggressive promotional tactics shouldn't necessarily be a longer term reason not to hold this stock. We don't believe that a 23% discount to the market is justified. We are therefore going long the stock v. a market short.

    Disclosure: I am long BBBY.

    Stocks: BBBY
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