DaveMcBlues

Craftmade International: Undervalued?

Just checking back in on Jan 7, 2009... seems my observations were directionally correct.

[e-mail]


On Aug 18 07:15 PM Reyer wrote:

> Thanks DaveMcBlues, excellent comment!
>
> Craftmade might very well be a company in secular decline. That is
> always something to consider when valuing a company in order to avoid
> value traps. Another way to look at a company in secular decline
> is the eventual liquidation value of the company.
>
> Craftmade is still profitable and cash flow positive, it seems premature
> right now to conclude they will go bankrupt however your point is
> excellent and I agree, there is a lot of risk with their business
> model.
>
> If Craftmade eventually does go out of business what should it be
> worth today? I would work out a liquidation value for the company
> based on discounts to hard assets if you believe this will happen.
> Or, just don't swing at it.
>
> -Reyer.

Craftmade International: Undervalued?

CRFT may be undervalued currently, but is a BIG future risk IMHO.

Big Box retailers are constantly finding ways to go direct to China to source things like lights, fans, air conditioners, etc. I don't think CRFT has realized the full impact of this trend and I don't imagine they have any real intellectual property to protect (with the exception of this season's design on products they sell).

All one has to do is look at the demise of Fedders (FJCC.pk) to see what happens when the Big Box retailers squeeze you out. Fedders business model and that of CRFT are almost identical... just different products.