Author Topic: CLWY - Calloway's Nursery  (Read 21661 times)

DTEJD1997

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Re: CLWY - Calloway's Nursery
« Reply #70 on: March 17, 2019, 10:49:21 AM »
Hey all:

I am bit surprised that 2018 numbers were lower than 2017's.  Not terrible though.

SG&A and interest expense is up, leading to the lower income.  I wonder if SG&A were up because of the new location being opened.

Sales were up a little.

In 2019, sales should go up because of the new location. 

If SG&A can move back towards 2017 levels, might be able to hit $.80/share in earnings?

If so, the stock might be able to move up a bit?


writser

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Re: CLWY - Calloway's Nursery
« Reply #71 on: March 17, 2019, 02:32:57 PM »
Maybe I'm being to simplistic but I find it hard to see a super compelling investment here at the moment. ~$60m market cap, more or less debt free. Maintenance CapEx is like what? 750k? So what are we looking at? 10x EV/EBIT and a ~7% FCF yield? Is that honestly so attractive for a microcap retailer with hardly any revenue growth? Why would this be much more attractive than, for example Dillard's?

Now I'm exaggerating a bit here. I see that the FCF yield is relatively juicy, they are returning cash to shareholders and there's a smart guy involved. Probably a very decent stock for a high single digit IRR and there's nothing wrong with that. But surely you guys don't expect this to double again in 2019? Or do you expect huge revenue increases? Margin improvements? Is there lots of value in excess real estate? Or can Kamin squeeze even more cash out of the company? The 2018 numbers suggest to me it is unlikely there are easy levers left to pull. Should this trade at double the multiples? What am I missing?

Would be great if someone could explain to me why this is an 'excellent' stock pick rather than an 'above average' stock pick at the moment because I don't see that at first glance.
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DTEJD1997

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Re: CLWY - Calloway's Nursery
« Reply #72 on: March 17, 2019, 10:12:54 PM »
Maybe I'm being to simplistic but I find it hard to see a super compelling investment here at the moment. ~$60m market cap, more or less debt free. Maintenance CapEx is like what? 750k? So what are we looking at? 10x EV/EBIT and a ~7% FCF yield? Is that honestly so attractive for a microcap retailer with hardly any revenue growth? Why would this be much more attractive than, for example Dillard's?

Now I'm exaggerating a bit here. I see that the FCF yield is relatively juicy, they are returning cash to shareholders and there's a smart guy involved. Probably a very decent stock for a high single digit IRR and there's nothing wrong with that. But surely you guys don't expect this to double again in 2019? Or do you expect huge revenue increases? Margin improvements? Is there lots of value in excess real estate? Or can Kamin squeeze even more cash out of the company? The 2018 numbers suggest to me it is unlikely there are easy levers left to pull. Should this trade at double the multiples? What am I missing?

Would be great if someone could explain to me why this is an 'excellent' stock pick rather than an 'above average' stock pick at the moment because I don't see that at first glance.

Writser:

You very well may be right about some things...Sure, CLWY is PROBABLY not a table pounding bargain...but it is not "expensive".  This is especially the case if they can indeed improve upon sales & earnings as I speculated earlier.

I think I could present a very good case that while DDS is "cheaper" on most financial metrics than CLWY, CLWY is probably a better investment.

Look at the history of the two stocks.  I can remember looking into DDS back when I was in Law School and visiting their Houston Galleria location!  That was over 20 years ago!  They really have not done much of anything since then.  I think they've gone up x2 in price (approximately) and this is in about a 20+ year time frame!  They have also paid some dividends also...but certainly NOT a good investment.  If I recall correctly, they have a dual share structure and the founding family controls all the votes, the board and sets the direction.  Their interests have been RADICALLY different than a shareholder looking for a return on their investment.

Contrast that to CLWY!  My family has a cost basis of LESS THAN ZERO due to dividends paying back the initial investment and then some.  Sure would be nice to get another $.50/share in dividends!  What if the stock goes from 8 to 10?  AND they pay another dividend?  A $2.50 return in the next 10 months is probably going to be A LOT more than what can be gained in DDS.

Finally, and perhaps most important of all...you've got a motivated Peter Kamin!  I trust him much more than family at DDS.  Look at his track record.  I predict he will make some goods moves in the future that benefit shareholders.  Can the same be said of DDS?