CONN'S, INC. (CONN)

Conn's sells home appliances and consumer electronics in 75 retail stores located in Texas, Louisiana, and Oklahoma.

Current Trading Metrics:

PE for FY 2010 Est. = 6.06x
PE for FY 2011 Est. = 5.18x

Compare this to a median for specialty retailers (BBY, BBBY, HGG, DELL, RSH) of:

PE for FY 2010 Est. = 15.92x
PE for FY 2011 Est. = 14.10x

Is this massive discount justified? My analysis says no based on three factors:

1. Analysts have downgraded this stock because of its geographic concentration in Texas. Analysts say that the Texas economy is showing delayed signs of the economic downturn therefore Conn's will face headwind over the next 9-12 months. Compare this to analysts projections for HHGregg (trading at a 19.59x PE multiple on FY 2010 estimates) which has concentration in the southeast and mid-atlantic. Supposedly growth prospects in those markets are greater because those markets are already in mid-cycle. I disagree with this analysis because I don't believe Texas is cycling on a lag; I believe Texas will suffer less of a cycle than the rest of the country because of the robustness of its economy in regards to housing. If you disagree with this, then by all means don't buy on the discount.

2. The absence of Circuit City from the electronics market will provide runway for sales growth over the next two years.

3. The company has an established niche market. Although it competes directly with electronics titan Best Buy in many of its locations, I believe its customer base is different in demographic and preference terms-customers seeking better service, more knowledgeable sales staff, and a more personalized buying experience.

In terms of risks:

Adj. leverage¹ 3.00x compared to industry median of 3.03x and HHGregg's multiple of 3.37x. I use adjusted leverage rather than straight leverage because of the prevalence of store leasing contracts among retailers.

The company does have more exposure to credit risk because of its credit program. Losses there have been significant but are likely reaching cycle highs.

Note: As of market close 11/22/09; All metrics calendarized to January year end to provide better comparison with Conn's fiscal estimates.
¹ Adjusted leverage = (Total debt + 8 x Rent expense) / LTM EBITDAR

low expectations always helps.

Unbelievable company with an unbelievable business model trading at a 90% discount to its true value. Can't go wrong. Also, Current Assets minus Total Liabilities equals $198M. With the stock trading at $147M, the current trading price of the firm's aggregate fixed assets is -$51M. The market will pay you $51M to take the company's fixed assets off their hands.

Hopefully a bounce on November 25th, 2009 when they release quarterly results.

This is one of the best buys out there at the current price compared to book value , debt etc.

Huge overreaction to 3rd quarter earnings. I bought some today.

down 35% in a month star cap. Bottom hunting...

PE is very low at this price. With government stimulus on appliances coming up plus economic recovery, this company should do well.

CAPS ALLSTAR

Got way oversold on some short term news that was interpreted as being worse than it was.
Will add more later.

As far as a stock pick, it looks very good at this price; however, my personal opinion of the store is pretty weak. Just by looking at what they carry, I don't understand their marketing position. They have been around for ages but they are only just now are emerging in my awareness. I'm keeping an eye on Conn's for now but vote outperform

Short sqeese from 6,5 to 10 ... sell after that

A great retailer in the Texas are that has undergone severe problems recently but should recover strongly. It is undervalued.

This is either a bargain or a stock on its deathbed.
JakilaTheHun seems to think the former and so does fmahnke, whose pitch is quite informative. Buy low and sell high may apply here. How much lower can this stock get?

Technical Bounce Likely

I bought this stock (for real) yesterday based on a number of factors. The most important considerations relate to the Balance Sheet. If I apply a very conservative haircut of 75% to all the receivables and inventories, and 50% to the PP&E,
I come up with $9 a share, which I view as a conservative liquidation value. This means that the market is assigning a negative value to the underlying business, A business which has been consistently profitable.

I don't know much about these stores, but I do know that the Texas economy is better shape than most. More importantly, I know that an officer of the Company bought a big block of shares at $8.34 which makes me more comfortable with my purchase at $ 7.41.

Inside buying - October 2009

This company hasn't had a year with earnings losses for the last ten years, and yet it is now trading at 55% of tangible book value and 84% of net current asset value. Mr. Market is pretty down on this company right now and I think the companies true value will show up in a price recovery. Standard & Poor gives this company a valuation of $17.00

Pick on a dip

CONN is a profitable company with growing revenues and earnings.
Moreover 42.5% of the float is short, pointing to a possible short squeeze.