CSS Industries: Stable Fundamentals, Cash-Rich Balance Sheet, And Deep Undervaluation Argue For 30%+ Upside
- CSS Industries is a micro-cap consumer products company (~$225 million market cap); its primary business is designing, manufacturing, marketing, and selling “social expression products” (i.e. gift wrap, bows, cards, etc.).
- High, stable level of return on assets excluding cash (i.e. 12-15%) points to a very profitable niche business.
- Balance sheet is cash rich with a $77 million in cash and short-term investments, no debt, and an insignificant $5 million in long-term obligations (mainly property leases).
- CSS is deeply undervalued on nearly every metric (EV/EBITDA = 4.4x, EV/EBIT = 5.6x, FCF yield = 12%, P/E ex. excess cash = 8.2x, and Dividend Yield = 2.5%).
- Potential for Private Equity buyout.