CCA Industries Is A Classic Value With A Catalyst Special Situation
- CCA Industries trades at a ~63% discount to its peer group after the tragic death of the CEO resulted in top line pressure and a spike in returns/allowances.
- However, the extremely poor performance in 4Q13 likely marked the trough given the subsequent sharp rebound, appointment of a new CEO and recent outsourcing agreements.
- These agreements should provide significant OpEx savings, lower working capital requirements and expanded distribution capabilities while freeing up funds for much needed investment in core brands.
- The expected return to profitability in FY14 should enable utilization of the $9.4 million of NOLs and lack of debt means operating income is substantially the same as net income.
- As a result, there is scope for significant appreciation even using extremely conservative revenue growth and valuation assumptions.