ever read "one up on wall street" by peter Lynch. It's a...

ever read "one up on wall street" by peter Lynch. It's a classic.

anway he classifies stocks into six categories - slow growers, stalwarts, fast growers, cyclicals, turnarounds and asset plays

BBG could be a number of these - asset play, cyclical and turnaround
asset play ... half of nixon was sold for $285m, the billabong brand might be worth $536m,($1.71) plus whole lot of other brands eg von zipper, element, RVCA etc
cylical - sells discretionary items (as opposed to staples like milk etc)

But lets just go with turnaround

at the moment the company is trading on a PE of 10
ie .84/.08 (if you extract abnormals)

the company usually trades on a PE of 17

Recently the company has embarked on a turnaround strategy
ie reduce the number of suppliers, reduce debt (via capital raising and the sale of Nixon), reduce the number of products, closed down underperforming stores etc

they have also sacked the CEO and bought in ex target managing director Launna Inman
Apparently with her experience at target she is a bit of a turnround specialist
Inman says they are looking at $210 ebitda (44c per share)'16.
growth rate = 15%
.65 margin
profit after tax = .29
(.65 x 44c = .29)
If the strategy works, the PE on stock has the potential to be a rerated from 10 to at least 15 or a price target of $4.35
(15 x .29 = $4.35)
five bagger
Ok, this may or may not occur
what do you think, will we get there?

by the way, the price could go lower. definately an unloved stock. But the fundamentals of the business (ie the turnaround strategy) are still in place and working slowly in the background