Under the Radar: Danier's Excellent Numbers
For the fiscal year ended June 26, 2010, Danier Leather (TSX: DL) reported year earnings of $1.58 per share. As their business is seasonal, a quarterly loss of 0.14 per share was recorded. This was down significantly from the same quarter last year in which they lost 0.47 per share.
Although there has been quite a run up in the last several months, this one is still a very compelling buy.
Here are some reasons why we continue to believe this one to be a hold.
1. Increasing sales and earnings
From 2009 to 2010, EBITDA more than tripled to $15.2 million from $4.3 million last year. Despite the sluggishness of Canadian retail, this brand has still managed to increase sales by a decent 4%.
2. Share repurchase
Management continues to believe that the stock is undervalued, in the last fiscal year, the company has repurchase 28.9% of the prior year's outstanding subordinate voting shares. Specifically, 1,352,700 voting shares were repurchased. This is nothing to sneeze at.
3. Financial discipline
While sales dipped a bit in the 4th quarter, they were up overall for the year. Management has shown financial discipline by keeping costs down and reducing costs by 1.1 million year over year.
4. No debt and huge cash position
Danier finished the fiscal 2010 year end with 26.6 million in cash. This is an increase of about 2 million in cash over last year. If you crunch the numbers, assuming today's share price of 10.55, you will notice that cash accounts for more than half of the value of the stock.
With sales increasing, and management showing that they can keep the costs down, and no debt, this company is essentially trading less than 4x the share price if subtract the cash.
The only risks we see to this stock are that it is thinly traded. This shouldn't be an issue if you believe in the stock medium to long term. The other risk is that the retail industry may not be very resilient should the economy encounter a double dip recession. Despite these two risks, we believe that with Danier's large cash hoard and prudent financial management should prove invaluable. Regardless, should the stock drop from its current levels, we will continue to purchase more and we believe that so will Danier's management.
Although there has been quite a run up in the last several months, this one is still a very compelling buy.
Here are some reasons why we continue to believe this one to be a hold.
1. Increasing sales and earnings
From 2009 to 2010, EBITDA more than tripled to $15.2 million from $4.3 million last year. Despite the sluggishness of Canadian retail, this brand has still managed to increase sales by a decent 4%.
2. Share repurchase
Management continues to believe that the stock is undervalued, in the last fiscal year, the company has repurchase 28.9% of the prior year's outstanding subordinate voting shares. Specifically, 1,352,700 voting shares were repurchased. This is nothing to sneeze at.
3. Financial discipline
While sales dipped a bit in the 4th quarter, they were up overall for the year. Management has shown financial discipline by keeping costs down and reducing costs by 1.1 million year over year.
4. No debt and huge cash position
Danier finished the fiscal 2010 year end with 26.6 million in cash. This is an increase of about 2 million in cash over last year. If you crunch the numbers, assuming today's share price of 10.55, you will notice that cash accounts for more than half of the value of the stock.
With sales increasing, and management showing that they can keep the costs down, and no debt, this company is essentially trading less than 4x the share price if subtract the cash.
The only risks we see to this stock are that it is thinly traded. This shouldn't be an issue if you believe in the stock medium to long term. The other risk is that the retail industry may not be very resilient should the economy encounter a double dip recession. Despite these two risks, we believe that with Danier's large cash hoard and prudent financial management should prove invaluable. Regardless, should the stock drop from its current levels, we will continue to purchase more and we believe that so will Danier's management.
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