Seeking Alpha

Brian Schieble's  Instablog

Brian Schieble
Send Message
Retail investor of five years, fundamentally oriented, short and long investor as cases warrant. Probably characterize my own investing style as aggressive conservative investing with large emphasis on valuation and entry point.
  • SPWH - Real, Current Potential 0 comments
    Aug 14, 2014 12:48 AM | about stocks: SPWH

    After what is reasonably thought of as a failed IPO, with first the initial underpricing and now the already occurred devaluation of the equity, Sportsman's Warehouse nevertheless looks pretty solid. You could make the case SPWH made out great on the IPO and now that the devaluation has occurred a good point of entry now exists.

    Now let me be straight, I don't approve in any manner with their balance sheet, as they're a typical private equity sell out and now public kind of company. They exist off their fundamentals, I'm sure their credit is good but other than that they have no cover by way of a robust balance sheet. I suppose the possibility exists that they expand too hard, a significant consumer spending depression happens, and they go out of business. Very low probability though. They are set to open 8 stores in 2015. That will be a ~16% increase in current store counts, and assumed a potential increase of 10-20% in revenues. At just 3% NI margin of roughly ~700 million sales they'd be trading at 12x earnings at the current close of $5.95.

    Assuming a 10% CAGR in store count per year they should have over 75 stores in 5 years, which should produce a billion in sales easy. If this share price doesn't move you're looking at a retailer trading at .25x sales.

    I think if they manage it right, steadily, they could maintain 30 million in profit a year within 3 years and keep going from there. So with a 5-year window, they should be able to garner a very normal 15x sporting goods retailer valuation at some point in time, which would lead to a 450 million valuation.

    That leads to a price target of $11.25.

    I'll reiterate from the title, imo it's very real and current potential.

    Disclosure: The author is long SPWH.

    Stocks: SPWH
Back To Brian Schieble's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.