Tile Shop Hldgs, Inc. (TTS) Looks Solid as a Rock

If that weren’t good enough, management also stated the average cost of the new stores it’s building is running around $1.35 million, which is less than the already-low $1.4 million the company projected last quarter. Better yet, each new location’s average payback period — or the time it takes for them to completely recoup their original investment — has remained steady at just 2.5 years.

The downside?
As fellow Fool Jim Royal pointed out a few months ago, future shareholder dilution remains inevitable as Tile Shop still has in-the-money warrants outstanding. In fact, during this quarter’s earnings conference call, management clarified that those warrants will ultimately be converted into 10.3 million new shares of Tile Shop common stock.

Even so, the company received a total of $86.4 million in cash to convert those warrants into shares, of which it used $30.1 million to repurchase some of the warrants in March. Of the remaining cash, $10 million will be used in operations and to reduce the company’s current $67.2 million in debt, leaving $46.3 million available for… well… whatever the company’s board decides is in the best interest of shareholders.

That said, considering the company’s founding CEO Robert Rucker owns around 17% of all outstanding shares, you can rest assured Tile Shop Hldgs, Inc. (NASDAQ:TTS) will put that money to good use.

Foolish final thoughts
In the end, Tile Shop’s business model is nice and simple, very profitable, and growing quickly. Combine that with a shareholder-friendly attitude and managers’ interests that are aligned with our own, and this stock increasingly looks more Foolish (with a capital “f”) by the day.

The article Tile Shop Holdings Looks Solid as a Rock originally appeared on Fool.com and is written by Steve Symington.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Lumber Liquidators and Tile Shop Holdings. The Motley Fool owns shares of Lumber Liquidators and Tile Shop Holdings.

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