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The Lights Are Still On At Blyth
Once upon a time, back in the 1990s, Greenwich-based candlemaker Blyth (NYSE:BTH) traded above $150. It had the world by the tail. As recently as 2003, its market cap was $1.5 billion and nearly a mid cap. Today, its market cap is less than $300 million with little indication this is going to change any time soon. While this might be true, value investors with a tiny bit of patience could make some money on the stock.
IN PICTURES: 5 "New" Rules For Safe Investing
Better Days
Back in 2003, when it was pushing for mid-cap status, Blyth's revenues for the first nine months of the year were $1 billion. For the nine months ended October 31, 2010, they were 40% less, or $600 million. That's disappointing, until you examine its operating profits in the two periods. In 2003, operating profits through the third quarter were $115 million. In fiscal 2011, they were $17 million or 85% lower than seven years earlier. To categorize its performance as anything less than disastrous would be pure folly. Operating margins went from double-digits to 3% in less than a decade. Thankfully, the bad news has already been factored in to its stock price.
Almost a Double
Blyth 's stock in January, 2009 was trading below $14, and today it sits around $35. It's done very well, although the only people buying its stock back then were likely distressed stock investors. Management's earnings guidance for fiscal 2011 is for earnings per share to be between $2.80 and $3. It hasn't made this kind of money since 2006. It's turning the corner, despite its revenue shortfalls.
Special Dividends
The company paid $1 special dividends in February, 2010 and December, 2010. Approximately $16 million went to shareholders in fiscal 2011, beyond its usual quarterly payment. Free cash flow is strong, despite sagging revenues. Full-year guidance suggests it'll be around $50 million. It's sitting on $116 million in cash. The company could pay two of these every year for the next decade, and if it continues to improve its bottom line, there will be plenty of cash to share with shareholders.
Wholesale Improvement
Much of the improvement in its third quarter numbers was a result of its wholesale segment, specifically its Midwest-CBK operation, which increased revenues by 35% while also reducing distribution and administrative costs because of its two former divisions merging into one. Wholesale operating profits in Q3 represented 81% of the overall total on just 29% of the revenue. All three operating segments made operational profits. Unfortunately, the direct selling business, which is the largest of the three, barely makes money. IfBlyth is to move forward on a permanent basis, it needs to lose this chain from around its neck.
The Bottom Line
CEO Robert Goergen owns 31.3% of the stock. In the past seven years, his holdings have shrunk by 75%. You can bet he's not going to retire until this turnaround is complete. Based on what's happening today, there's a chance that may come to fruition sometime in 2013. Another double between now and then is certainly possible. In the meantime, enjoy the special dividends. (For related reading, take a look at What Investors Can Learn From Insider Trading.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 5 "New" Rules For Safe Investing
Better Days
Back in 2003, when it was pushing for mid-cap status, Blyth's revenues for the first nine months of the year were $1 billion. For the nine months ended October 31, 2010, they were 40% less, or $600 million. That's disappointing, until you examine its operating profits in the two periods. In 2003, operating profits through the third quarter were $115 million. In fiscal 2011, they were $17 million or 85% lower than seven years earlier. To categorize its performance as anything less than disastrous would be pure folly. Operating margins went from double-digits to 3% in less than a decade. Thankfully, the bad news has already been factored in to its stock price.
Almost a Double
|
Company |
EV/EBITDA (TTM) |
|
|
4.0 |
|
CSS Industries (NYSE:CSS) |
10.4 |
|
American Greetings (NYSE:AM) |
4.2 |
|
|
7.6 |
|
Tupperware Brands (NYSE:TUP) |
8.8 |
The company paid $1 special dividends in February, 2010 and December, 2010. Approximately $16 million went to shareholders in fiscal 2011, beyond its usual quarterly payment. Free cash flow is strong, despite sagging revenues. Full-year guidance suggests it'll be around $50 million. It's sitting on $116 million in cash. The company could pay two of these every year for the next decade, and if it continues to improve its bottom line, there will be plenty of cash to share with shareholders.
Wholesale Improvement
Much of the improvement in its third quarter numbers was a result of its wholesale segment, specifically its Midwest-CBK operation, which increased revenues by 35% while also reducing distribution and administrative costs because of its two former divisions merging into one. Wholesale operating profits in Q3 represented 81% of the overall total on just 29% of the revenue. All three operating segments made operational profits. Unfortunately, the direct selling business, which is the largest of the three, barely makes money. If
The Bottom Line
CEO Robert Goergen owns 31.3% of the stock. In the past seven years, his holdings have shrunk by 75%. You can bet he's not going to retire until this turnaround is complete. Based on what's happening today, there's a chance that may come to fruition sometime in 2013. Another double between now and then is certainly possible. In the meantime, enjoy the special dividends. (For related reading, take a look at What Investors Can Learn From Insider Trading.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Will Ashworth
Will Ashworth lives and works in Toronto, Canada. He's worked in and around the financial services industry for much of his adult life. He loves investing and is passionate about helping others learn how to put their money to work.
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