And as for Clayton's debt level, your post implied that ROE is
coming from leverage.
No, I simply meant that a 1/4 debt/equity ratio does make simple ROE
an inaccurate measure of profitability. 1% may be small, but 3-4%
isn't. Not if you're trying to compound the thing and make it like a
Buffett stock.
For Clayton (to get the numbers out in the open),
ROE D/E Avg PE Net Margin
1998 15.6 0.28 15.9 12.2
1997 15.8 0.03 15.3 12.3
1996 16.4 0.05 16.4 12.2
1995 16.0 0.09 13.4 11.5
1994 15.0 0.15 19.1 11.0
1993 15.4 0.39 18.5 11.3
1992 13.4 0.66 16.7 10.6
1991 14.2 1.13 12.9 8.9
1990 18.4 1.64 9.2 7.6
1989 18.6 1.85 9.9 6.7
The industry average is ROE (5 year) 16.6. Clayton's ROC (5 year) is
14. The industry average is 14.1. Champion returns ROE (5 year) 25.6
and ROC (5 year) 22.0. Its margins don't measure up to Clayton's
superb numbers due to Clayton's higher-end focus, and they never will
since Champion is making the big retail push. For history buffs,
Champion has been around 30 years longer than Clayton and is indeed
the biggest manufacturer. The great results arrived with Mr. Young.
Obviously, to me, Champion is the screaming buy, as it appears cheaper
on PE and cash flow bases too. But we certainly do not have a 3
person consensus, and there is such a consensus on Clayton. So the
only way to solve this is to watch.
It looks as though Mr. Clayton will hand off the reins to his son.
Jim, how good is the son?
Mike |
