Q3 Analysis and Value EstimateThe financial statements and MD&A have added some colour to the news release issued on March 15th. Here are a few tidbits:
- While sales for the first 3 quarters were up 7% from last year, Q3 revenue was off 10% as “a result of different timing for new releases and catalogue mailings when compared to the same period in the previous year.” I’m not sure what the impact of this is on the surrounding quarters, especially Q4 of this year; I suppose well have to wait and see.
- The bottom line (after tax) was improved by $52k or $0.006/sh by the $85k foreign exchange gain.
- Regardless of the above, the quarter was decent and the company’s ability to generate cash flow continues to be excellent. From having zero cash per share at the end of Q2 2006, it now has all of 24 cents! I recognize that accounts payable is a little higher than accounts receivable, so adjusting for this still yields net cash of 19 cents. Working capital is now 38 cents per share and the company has no debt. This is really quite good.
- Fully diluted and fully taxable trailing twelve months earnings are now $.084/share
So, what’s BFS worth? To be conservative, I would take the $.084, multiply by a p/e of 8, add on the net cash of $.19 and then deduct the dividend of $.03 to yield $.83. If you use working capital instead of net cash (which would be reasonable in light of the fact that there’s no debt), that yields a value of $1.02. Whichever way you go, BFS still appears to be undervalued.
We should keep in mind that Q4 of last year included a one-time expense item. If Q4 of 2007 is decent, annual eps could be in the $.09 range.