No longer a Best Buy?
January 6, 2012 12:31 PM Subscribe
Why Best Buy is Going out of Business...Gradually.
posted by VikingSword (143 comments total)
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Or not - opposing view
. 'Consider a few key metrics. Despite the disappearance of competitors including Circuit City, the company is losing market share. Its last earnings announcement disappointed investors. In 2011, the company’s stock has lost 40% of its value. Forward P/E is a mere 6.23 (industry average is 10.20). Its market cap down to less than $9 billion. Its average analyst rating, according to The Street.com, is a B-.'
'But the numbers only scratch the surface. To discover the real reasons behind the company’s decline, just take this simple test. Walk into one of the company’s retail locations or shop online. And try, really try, not to lose your temper.'
"Here is the real story and all Mr. Downes had to do was take two minutes to look at the numbers. Examining the balance sheet of BBY as of November 26, 2011, it is clear that BBY is not in any danger of bankruptcy any time soon. Personally, in analyzing retailers like BBY, I like to see inventories and receivables greater than accounts payable. When this is the case, as it is with BBY, I feel that the investor is able to disregard the large accounts payable balance as a non-concern. Looking at the long-term debt situation, BBY has a debt/equity ratio of approximately 35 and more cash on the balance sheet than long-term debt.
However, the best thing about BBY that investors should take note of is that it is a cash cow. Through the fiscal third quarter of 2012, BBY had free cash flow of $2 billion. This means that BBY, with a market capitalization of $8.36 billion as of January 4th, 2012 is selling for about 4x its free cash flow. Also, management has been putting that cash to good use, buying back shares and increasing the dividend (last increased on June 24, 2010. As of Jan 4th, 2012, yields 2.7%). It would not surprise me if management increases the dividend this year as well, as there is plenty of cash to do so."