We were asked yesterday what we thought of apparel maker Liz Claiborne, Inc. (NYSE: LIZ).
Our thoughts are based on the company's most recent Form 10-K filing for fiscal year ending December 31, 2008, as filed with the Securities and Exchange Commission on March 4, 2009.
To us, there is little short-term investment incentive for this stock. With first resistance at $5.32 and a recent close of $5.28, we simply aren't interested in risking $5+ to make $0.04.
We believe that a reasonable value estimate for the stock is in the $6-$7 range, and would add the stock to our portfolio at something less than $2.25.
At issue for us is that company's debt, which at the end of fiscal 2008, was $743 million, more than 6 times EBITDA, and near 1.5 times Net Fixed Assets. While the company did reduce debt during fiscal 2008 by $118 million, management also authorized the payment of $21 million in cash dividends, something, in our opinion, higlights the lack of management's entreprenurial spirit. At the very least, management should have replaced a portion of the $48 million in cash spent on interest payments on the company's debt.
Lastly, we note that for company ended fiscal 2008 with an equity value of ($2.27), tangible book value of $2.65, and shareholder equity of $5.30, none of which makes us fans of the stock at this time.
For the Liz Claiborne worksheet, please click here. To see what the rest of the CAPS Community has to say, please click here.