Van Elle

Van Elle Holdings – A Somero Replacement?

I loves a bargain.  Running my screen recently led me to Van Elle Holdings PLC, a company definitely meeting that criteria.  Van Elle currently trades at a shade over seven times earnings, and only 0.67 times sales.  It yields approximately 3.6% as well.  But does it warrant a purchase?  I’m going to enlist the help of one of my current holdings to try and find out.

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XLM

XLM: A Valuation of XL Media PLC

XLM are something of a media darling at the moment, in more ways than one.  Their “materially ahead” trading statement on November 21st was music to holders’ ears, and led non-holders (myself included) to question why they aren’t invested already.

I actually looked at XL Media last year, and again earlier this year when researching Taptica (a company working in similar field).  A quick discounted cash flow model suggested the company was trading at a massive discount to its intrinsic value.  However, it’s up over 100% year to date, so is this still the case today?

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Cheaper

Stocks May Be Cheaper Than They Appear

If you read any of my company valuations posts, you’ll know I like to incorporate a discounted cash flow model when looking into the merits of a business.  Make no mistake however, this is but one tool to be used when investigating a company, and obviously does not work under all circumstances (i.e. companies that don’t generate positive free cash flow).  A discounted cash flow valuation can be as simple or as complicated as you want.  I’d like to explore that idea a little bit.

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Buying Quality Using Discounted Cash Flows

Valuation matters to me.  In fact, I’m particularly fond of one of the many aphorisms coined by Warren Buffett:  “Price is what you pay, value is what you get”.  With that in mind, I read an article this week in Barron’s suggesting Under Armour could double from its current price (thanks to @chriswmayer).  Eye catching for sure.  The company has been beaten down recently, and isn’t particularly expensive, but this wasn’t always the case:

“Under Armour must have been overvalued back in 2005, when it sold at a P/E of 90 and had a price-to-sales multiple of 6.3. Despite what looked like a crazy valuation, it is up nearly 500% since 2005, even after the huge pullback in the past year.”

I’d have struggled to buy at 90 times earnings and over 6 times sales, but are there circumstances in which I would pay a higher price?  Yes.  I’d pay a higher price for perceived higher value, and one way to determine value is through free cash flows.

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