This is a lousy business. End of discussion for me.
Not so fast. First off, huh? This is from Jim, he of Tejon Ranch? Champion of Penobscot? Repeat buyer of Hyde...er Saucony?
Ok, the following is thrown together quickly, so don't laugh if there's some glaring errors (and I am still investigating BGP):
The way I look at it, BKS (blech, blech) trades at a PE of 29, 5 times leveraged book with a debt/equity of nearly 1, and 15 pennies/share in cash. It also gets a profit margin of 1.9% for a PSR of 0.84. ROE is 17% but it's leveraged. The stock is about 25% off 52 week highs and running into a lot of overhead pressure.
BGP, which I like visiting better anyway (hey, I met Aerosmith there), trades at a PE of 14, under 2X debt-free book, and 53 pennies per share in cash. With a profit margin of 3.4% for a PSR of 0.48. ROE is 15%. And that's a stable business. The stock is 65% off 52 week highs and basing.
This didn't persuade me until BGP made their announcement. Why? Because BGP has prudent management, and they're proving it by keeping a level head about this whole internet thing. They state they will not throw money down that hole. And hole it is, right? Unless you've reversed your position on Amazon's business economics.
That's shabby?
I see visiting bookstores as a continuing trend that demographics favor, as the population ages, and even the young crowd things that hanging out in the local bookstore is fun.
Hey, BGP's superstore same store trends are still up. Gross margins are still increasing due to tighter inventory controls. It's not perfect, I know, and it's a probably a good business only one quarter of the year.
Still, it's a call I'm about to make good on.
Time will tell,
Mike
Mike |
