2 potentially cheap stocks

Last week, I ran a search for companies trading at less than 2x and 3x current net asset value (NCAV), which were also trading at less than 15x next year’s consensus estimates. At these levels, these companies could be cheap from an asset and profit point of view. However, in this type of volatile market and economy, there are still many things that could go wrong. However, it’s good to know what’s potentially cheap here.

I shortlisted Vera Bradley (VRA) last week as the initial candidate, and wanted to give a quick follow up before revealing another example. VRA released its earnings shortly before my column was submitted, but updated balance sheet data was not yet available. Cash increased in the fourth quarter to $88.4 million, or about $2.65 per share, from $75 million / $2.22 per share. In fact, with the updated balance sheet data, VRA is now trading at 1.98x NCAV. Another detail: the company repurchased 650,000 shares during the fourth quarter, at an average price of $8.63.

Johnson Outdoors (JOUT) also makes the cut, which manufactures and sells a variety of fishing, camping and other products. Currently trading at 2.87x NCAV, the stock has recently had a bad run. Shares are down 47% in the past year and 17% year-to-date. JOUT was stock at $154 — an all-time high last April — and closed at $79.22 on Friday.

The company ended its last quarter with $167.5 million, or $16.59/share in cash and debt free. It has exceeded “consensus” earnings estimates for six consecutive quarters. Last month, the company announced first-quarter warnings of $1.07, above the 90-cent estimate. However, there is only one analyst currently covering the company. The estimate for fiscal 2023 is for earnings per share of $8.54, bringing the forward estimate to $9. There are two classes of shares, A shares currently pay a dividend of 30 cents, which equates to a yield of 1.5%. Class B shares are not listed on a stock exchange.

JOUT has done very well during the pandemic. While revenue has fallen recently (down 7.3% for the first quarter), that was outside of some strong pandemic-era numbers. Inflationary pressures are likely weighing on the company right now, particularly high gasoline prices.

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