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Joseph Levy is a Certified Public Accountant in the states of New York and New Jersey. For more than 20 years until 09-1-2000, he was the principal owner of an accounting practice that provided forensic accounting services to the Insurance Industry. After selling the accounting practice on... More
  • Undervalued Specialty Retailer 1 comment
    Apr 20, 2010 7:02 PM | about stocks: BAMM

    Books-A-Million Inc. operates superstores and traditional bookstores that offer a selection of hardcover and paperback books, magazines, and newspapers. It also offers other merchandise, including gifts, cards, collectibles, magazines, music, and DVDs, as well as coffee, tea, and other edible products. The company also offers its products over the Internet at Booksamillion.com.

     
    When searching out a potential investment we look for two things:

     

    1. Value based on Current Price & Capitalization

    2. Future Growth or other Catalysts that will result in Price Appreciation

     

    We look at historical data to provide “clues” for the above. Naturally, since historical data is yesterday’s news its’ significance is not as important as future developments. However, garnering good “clues” can result in making sound investment decisions for the timing of when to buy a stock.  Many "good" companies that are overpriced make "poor" investments because they were purchased at the wrong time. We prepare a comprehensive Excel report whenever researching a company.  Anyone interested in our report just email me at resgroweq@yahoo.com and we will send it to you.

     

    Below is some historical info on BAMM: 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     Share Price

     

     

        Net Income

     

    Optng Cash Flow

     

    Dvdnds

    Shrs

    #

    FYE

    High

    Low

     

    Sales

    $ Amt

    EPS

     

    $ Amt

    Per Shr

     

    Per Shr

    O/S

    Stores

    01/30/2010

       $15.00

        $2.25

     

       $508,666

       $13,836

       $0.88

     

       $31,985

    $2.03

     

       $ 0.30

      15,744

       223

    01/31/2009

       11.19

        1.70

     

       515,320

       10,573

       0.67

     

       39,223

    2.50

     

         0.28

      15,676

       220

    02/02/2008

       20.70

        9.61

     

       536,054

       16,522

       1.00

     

       34,494

    2.09

     

         3.36

      16,476

       208

    02/03/2007

       23.70

      10.35

     

       520,417

       18,887

       1.12

     

       21,306

    1.27

     

         0.33

      16,818

       206

    01/28/2006

       11.70

        7.02

     

       503,751

       13,067

       0.78

     

       36,713

    2.19

     

         0.23

      16,964

       205

    01/29/2005

       10.70

        5.25

     

       474,099

       10,199

       0.59

     

       47,193

    2.75

     

         0.23

      17,178

       206

    01/31/2004

         7.18

        2.00

     

       457,234

               7,126

       0.42

     

       34,678

    2.07

     

     0.00

      16,789

       202

            Note: Amounts above are in thousands except for per share data and total # of stores.

     

     

    The closing price of BAMM on April 20, 2010 was $7.60 giving it a market cap of approximately $120 million (.24 X annual sales); a PE ratio of 8.6 X diluted EPS of $0.88 in the fiscal year end 01-30-10; and a dividend yield of 3.95% (based on a $0.30 per share declared dividend). Despite sales declining by -1.3% in the FYE 01-30-10 vs. 01-31-09, full taxed EPS increased by just over +30%. I really like the company's history of generating strong operating cash flow each year, which has averaged over $2.00+ per share in all fiscal years ending from 2004 through 2010, except for 2007 ( $1.27 per share).

     

    The company has been using the cash generated in ways that should benefit the share price in the future. Besides regular quarterly dividends and certain special dividends (including a $3.00 per share dividend in June 2007) they have been buying back shares and opening new stores.  The weighted average diluted shares outstanding were reduced by just over 1 million shares since 01-31-2004 (15.7 million shares 01-30-10 versus 16.8 million shares 01-31-04). Additionally, “On March 11, 2010, the Board of Directors (the “Board”) also authorized a new common stock repurchase program (the “March 2010 Program”) of $5.0 million to repurchase our common stock through April 30, 2011”. 

     

     From the fiscal year ended 01-29-05 through the fiscal year ended 02-02-08 the total number of stores open remained fairly constant in a narrow range (205 to 208 stores).  After 02-02-08 management became more aggressive in opening new stores and at 01-30-2010 the total stores open increased to 223. Additionally new stores have been opened in Pennsylvania and New Jersey during the current fiscal year. As of 01-31-04 the stores open included 163 superstores and 39 traditional stores and at 01-30-10 there were 201 superstores and 22 traditional stores  reflecting a change towards having more superstores.

     

    The company’s ability to generate strong operating cash flow has allowed them to make an investment in Yogurt Mountain Holding, LLC described in the most recent Form 10K as follows:

     

    On March 24, 2010, the Company entered into a Limited Liability Company Agreement (the “Agreement”) to purchase a 40% equity interest in Yogurt Mountain Holding, LLC (“Yogurt Mountain”).  As part of the Agreement, the Company contributed $3.0 million in cash.  Yogurt Mountain was formed for the purpose of developing and operating retail yogurt stores and franchising retail yogurt stores to third party franchisees. The retail stores offer tart yogurts that cater to the growing trend in healthy foods.  Yogurt Mountain currently operates two retail yogurt stores in Alabama.

     

    In connection with the Agreement, the Company entered a Line of Credit Agreement (the “Agreement”) with Yogurt Mountain pursuant to which the Company has committed to provide up to $1.5 million to Yogurt Mountain under a non-revolving line of credit through March 2015.  The proceeds from the Agreement shall be used by Yogurt Mountain for the purpose of new store growth capital requirements”.    

     

    When looking at a chart on BAMM, it appears that the stock has bottomed out in the $6 to $7+ area and could head higher in the future. Based on all the info mentioned above, I believe BAMM has the potential for good upside price appreciation and has more limited downside risk. I have not seen an analysts with published future consensus Revenue and EPS figures for BAMM.

    Joseph Levy, General Partner
    LLG Equities, LP

     



    Disclosure: LLG Equities, LP has a long position in BAMM.

    Disclosure: LLG Equities, LP has a long position in BAMM
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  • rjm22
    , contributor
    Comments (8) | Send Message
     
    Does that $3+ million "investment" in a 2 store chain bother you ?

     

    Seems awfully pricey.
    21 Apr 2010, 05:17 PM Reply Like
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