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My scope is to assist private companies both abroad and domestic wishing to go public in the U.S. We invest in the company in the earliest stages, and assist in coordinating their audit, legal RTO or IPO. We also offer M&A identification, execution and consulting, Investors relations... More
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  • Can PERY And BSET Continue To Surge Higher? 0 comments
    Aug 9, 2014 11:21 AM | about stocks: PERY, BSET

    (click to enlarge)Stocks constantly gaining ground are something most investors wish to have in their portfolios. However, the fear of a huge downside in such stocks is what keeps investors away when presented with such opportunities. Perry Ellis International Inc. (NASDAQ: PERY) and Bassett Furniture Industries Inc. (NASDAQ: BSET) are such cases where investors can maximize returns.

    Fortunes of apparel companies took a nosedive last year and it was no different for Perry Ellis International which posted a loss of $22.8 million last year as top line shrank 5.9 percent. This Florida based company has a broad range of brands including Anchor Blue, Axist, Ben Hogan, C&C California, Cubavera, Farah, Gotcha, Grand Slam, Jantzen, John Henry, Laundry by Shelli Segal, Manhattan, Munsingwear, Perry Ellis, Rafaella, and Savane. Despite the blues, the stock has run up more than 22 percent over the last three months.

    Although the company managed to post a smaller profit of $7.8 million in the latest quarter, the reason behind the appreciation is the stock's undervaluation and the resulting activism from key shareholders. Activist firm Legion Partners, which has a 5.9 percent stake in Perry Ellis, is in discussions with the company's management to improve what's wrong. In other words, Legion is after Perry Ellis' management for changes including annual elections for board members and review of all strategic alternatives to enhance shareholder value. Despite the upswing, the stock trades at a 28 percent discount to its book value while the discount on the price by sales ratio is much higher at 70 percent. Given the increasing pressure on the management, investors can see implementation of some wide-ranging corporate measures.

    Shares of Bassett Furniture Industries advanced 27 percent in a matter of five days towards late June as it posted much improved second quarter results that many termed as green shoots. Top line grew 4.9 percent during the quarter, but profits surged 30.6 percent, underscoring a massive improvement in margins. This was in sharp contrast to the broader trend of soft demand in wood furniture and came despite the harsher winter months. The company sells its furniture products through a chain of 94 wholly-owned and franchised outlets.

    The company has an active share repurchase program under which it bought back common stock worth $2.9 million during the latest quarter. Since the profitability is being driven by higher efficiency and a lean balance sheet, the stock has more headroom to grow. This is also supported by valuations which include a small premium of 3 percent on book value and a forward price earnings ratio of 18.4.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: PERY, BSET
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