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Jos. A Bank: A Compounder That Has Grown Its Book Value 24% Annually Since 2003

|Includes: Jos. A. Bank Clothiers, Inc. (JOSB)

I was going through my daily routine today which includes briefly scanning over the 52 week low list. I wrote a post earlier at Base Hit Investing that discusses more about my thoughts on the value of the 52 week low list and how I go about using that list.

The only stock that caught my eye today was Jos. A Bank Clothiers (NASDAQ:JOSB). I usually scan the list for names I recognize, and then I look for names that are at multiyear lows. As I mentioned in my other post, multiyear lows are where mean reversion tends to work, and it's often a good place to look for bargains.

JOSB is at a two year low. It is not extremely cheap at 13 times earnings, but the price to book ratio of less than 2 is the lowest it has been since it approached about 1.5 in 2008. In fact, one of the things that I like most about this company is its ability to compound its book value, which it has been able to do by 24% per year since 2003.

Book value growth is one of my favorite metrics to look at for fairly obvious reasons. Book value (net worth) growth shows that a company has enough of a sustainable competitive advantage that allows it to become more valuable as time passes. This value comes in the form of retained earnings or cash flow that in turn can be used to buy back shares, make strategic acquisitions, or eventually pay out to shareholders.

A stock that is growing its book value over a long period of time (10 years or more preferably) is providing proof that it has an advantage of some sort, and those advantages are often hard for competitors to take away.

JOSB also is compounding its revenues and earnings, although not quite as fast as its book value.

My overall initial thought after quickly glancing at the financials is that it's a good company with no debt, an ability to grow sales, earnings, and book value, and it's relatively cheap vs its peers and its own historical valuations:

It was cheaper in 2008 when the stock dropped to 15, but I think it's unlikely that the stock will approach 2008 valuations, and given the strong book value growth from $3 to $23 over the past 10 years, I will be adding the stock to my general watchlist to keep an eye on. If it does get a bit cheaper, I think it's worth investigating further.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.