• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Consumer Discretionary

This Cheap Stock Is a Rare Find These Days

At this writing, there are just three of them with market caps in excess of $100 million.
By JONATHAN HELLER
May 14, 2018 | 12:00 PM EDT
Stocks quotes in this article: CSS, VOXX, RELL

This past weekend, my son and I saw the new Avengers movie, Avengers: Infinity War, which reportedly had the largest global opening in history two weeks ago, raking in $630 million. Strangely, we were literally the only two in the entire theater, so I'm guessing that most have already seen it. Most people also seem to love this movie. I did not. It was way too complicated, too many characters, and there was way too much going on. I must be getting a bit long in the tooth, but I'd prefer the next superhero movie I see to be two people in a room, with dialogue only. Keep it simple.

Keeping it simple also applies to investing, so I was thrilled this weekend to see that there is a new net/net available (company trading below its net current asset value). There is nothing simpler than utilizing this technique developed by Benjamin Graham in order to identify potentially cheap companies. Unfortunately, in this market environment in which the rising tide of the past 10 years has lifted many boats, you rarely see net/nets anymore. In fact, at this writing, there are just three with market caps in excess of $100 million. The newest addition CSS Industries (CSS) , joins VOXX International (VOXX) and Richardson Electronics (RELL) .

CSS, which sells craft, seasonal, and celebration products to mass market retailers, is a member of my 2018 Double Net Value Portfolio, a static portfolio which was designed to track companies trading at between 1 and 2 times net current asset value (NCAV). However, the company has had such a precipitous fall recently, down 37% since reporting third quarter results in early February, that it now trades at 0.99X NCAV.

While the company beat third quarter earnings estimates, reporting earnings per share of $1.52 versus the $1.32 "consensus" (the company is followed by just one analyst), revenue of $130.6 million missed the mark by $3.9 million. The company's third quarter is the make or break quarter; given the seasonal nature of many of its products, that's when most of the profits are typically generated.

What is likely weighing the stock down is the fact that the company has lowered full year 2018 guidance. The company expects full year revenue will be in the $356 million to $362 million range, down from the previous range of $367 million to $369 million, with "base" business down 5% to 7% from last year. Management also reduced adjusted EBITDA expectations for the year from a range of $28 to $32 million, to a range of $23 to $26 million.

The company also operates in an increasingly difficult retail environment, and has also been assimilating a couple of recent acquisitions, Simplicity Creative Group, which it completed this past November, and McCall Pattern Company, which it acquired in late 2016.

All of this adds up to a company that is being shunned by the market, and is entering its low season quarters. Sales generally pick up in the second quarter (ends in September), so there might not be much to see the next two quarters.

CSS ended its latest reported quarter with $30 million, or $3.30 per share, in cash, and $48.7 million in debt, which it used to fund the Simplicity acquisition. Besides trading below its NCAV, it also trades at just 0.69X tangible book value per share.

Stocks often are cheap for good reasons; the difficult part is trying to figure out when the markets have overly punished a name. I am still trying to determine that in the case of CSS, but it is a name I'll be watching. 

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jonathan Heller was Long RELL, VOXX.

TAGS: Investing | U.S. Equity | Consumer Discretionary | Markets | Stocks

More from Consumer Discretionary

The Sagas of a Cruise Operator and a Burger Joint Continue

Jonathan Heller
Feb 24, 2021 10:00 AM EST

Carnival Corp. continues to sell debt and equity as it works to stay afloat, while Steak n Shake deals with problems of its own.

A Furniture Seller and Footwear Retailer With Room to Run

Bret Jensen
Feb 24, 2021 8:46 AM EST

Hooker Furniture and Foot Locker recently raised their dividends and could provide more upside to buyers of the shares in the months ahead.

DoorDash's Charts Tell Me to Stay Near the Exit Door

Bruce Kamich
Feb 22, 2021 8:55 AM EST

Buyers of DASH are not being aggressive.

Ruth's Hospitality Group Serves Up Medium-Rare Charts

Bruce Kamich
Feb 19, 2021 8:28 AM EST

The pace of the advance in the steakhouse operator's shares has been slowing and volume is shrinking, too, so be cautious.

Norwegian Cruise Lines? Get Off at the Nearest Port

Bruce Kamich
Feb 17, 2021 1:00 PM EST

The charts suggest that people will continue to be disappointed.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:51 AM EST REAL MONEY

    Watch Bob Lang and Doug Kass Discuss Short-Selling!

    Bob Lang and Doug Kass with an engaging and educat...
  • 11:32 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Navigating a Market Correction
  • 11:29 AM EST GARY BERMAN

    Where Does the Nasdaq Go From Here?

    Where does the Nasdaq Composite (CCMP) index go fr...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login