Men's Warehouse: The Bull Case
MW is a true value play at these levels (wait... don't leave!). In this case, value means the stock is actually cheap on a fundamental basis. It doesn't mean value trap, as in tons of debt, unsustainable dividend (think GE). Yes, Men's Warehouse has had a rough few quarters, but I feel that it has now officially reached dirt-cheap status. Let's take a look at MW:
#1 - Fundamentals: Total assets = $611 million, Total liabilities = $388 million. Price/Sales = .30, Trailing P/E = 8.1, Price/Book = .71.
#2 - They sell the same products as the competition, but cheaper, and provide good service. Their discount retailer status should serve them well during this crisis.
#3 - Very little debt. So rare these days, and yet still taken for granted. Highly leveraged companies (cough, GE, cough) are what you wanna steer clear of now.
#4 - Beaten down - 20% of MW's float is short, so there's potential for a serious covering-rally. It's down from a high of over $50 in 2007 to $11 today. It may have farther to fall, but I think it's a good value here, and I'm going to average into a position starting this week.
#5 - Sustainable dividend of 2.4%. Their dividend payout ratio is only 20%. I love this kind of conservative management in this environment. (Note: their dividend was the same at $50 as it is now, so it wasn't management who got ahead of themselves...)
Almost everybody has given up on MW, which may be a good thing. Gotta have upgrades to move up. Plus, Standard & Poors just reduced them to sell. Based on S&P's recent failures and conflict-of-interest scandals , this could be a contrarian-buy-signal (MW is not a client of theirs, unlike many highly rated POS companies)