Thoughts on Jos. A. Bank Clothiers Inc (JOSB) Valuation

Page 1 of 2

Jos. A Bank Valuation

Starting off with some basic company highs and lows to give you an overview to work with. Jotting down this information is like stretching and warming up before you begin an intense workout.

Highlights

  • FCF positive retailer since 2004
  • Has increased shareholders equity every year for more than 10 years
  • No debt
  • No intangibles or goodwill on the balance sheet
  • Cash adjusted PE is 10
  • No financial risk
  • TTM Piotroski score of 8

Lowlights

  • Drop in ROE and CROIC from the highs of 20% in 2007 to 13% TTM
  • Drop in ROE and CROIC resulting from margin decrease
  • Cash conversion cycle of 260 days is more than twice the length of competitor Men’s Warehouse
  • Recent inventory mix issues caused big miss in earnings
  • Company is known for ridiculously big sales all the time

These highlights and lowlights give you a good idea about the company. Nothing fancy, but it includes points from all three financial statements.

The Valuation Has Changed and Here’s Why

On June 21, the company released a press release that it is looking to acquire companies.

I interpret this as a company slowing down. Whatever the company has achieved until June 21, it’s not as important because this new piece of information changes the perspective of the valuation and investment.

Jos. A. Bank Clothiers Inc (NASDAQ:JOSB)Until 2013 results came in, you could expect Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) to grow at 10-15%. And why not? It has a century of experience and decades of consistent and trust worthy performance. It’s an elite retailer.

However, there is a big difference between a retailer like Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) acquiring companies and Google making acquisitions. Google acquires companies throughout the year, not for growth, but to acquire intellectual property, talent, eliminate potential competitors and improve inefficiencies. It doesn’t even matter if the business is different because Google can make it mingle or they cut it off.

I can’t say the same for Jos. A. Bank Clothiers Inc (NASDAQ:JOSB).

They sell suits and mens attire and that’s all they have ever done. The management does not have experience with acquisitions and to bring in a whole new brand or retail strategy could seriously do damage to the company.

The only benefit I can see is the quick, short-term fix in EPS that an acquisition will provide.

Jos. A Bank Valuation Ranges

If I assumed that Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) would continue doing what it has always done, then I’m confident that the fair value is in the $40 – $45 range.

But things have turned in a different direction. More competition from other mid tier stores like Macy’s and slowing sales for both retail stores and the internet requires an adjustment to the expectations.

New stores will open, but with retail, new stores always have lower sales. As it matures, then sales increases.

While FCF is positive, it has fallen from the highs of $106m in 2011 to $84.5m in 2013. That’s a 20% drop.

What if FCF is zero going forward? How much will Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) be worth?

  • DCF with 0% growth is $28
  • Tangible book value is $24
  • NCAV is $19
  • Current price is $41

That’s good downside protection on the stock and it provides a base value to work with.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!