NO ONE CARES ABOUT BOOT!

Here is a question ...if a company reports 30% YoY operating earnings per share growth and no one hears it, did it really happen?

When I last wrote about BOOT I stated that going forward I will be looking for:

“ trends in gross margins and SG&A as % of sales and if revenue is trending above or below the 8% level set by management as the goal.”

I also stated that “if BOOT reports similar sales growth in the seasonally important 3^rd quarter than estimates will surely go up and the stock will have a strong up side move.”

By just about every measure, BOOT reported impressive numbers in their fiscal 3rd quarter. The stock was up as much as 4.5% midday but finished up 1.2% with only 9,100 shares trading hands .... no one cared!

Revenue came in up 12% and ahead of the company’s long term growth target of 8%. Work boots were above average with 20% YoY sales growth and recreational boots came in at slightly below average at 7%.

While the revenue growth is very nice, the real jem is continued margin improvement due to good inventory management. Gross margins came in at 40.1% and up 10bps YoY (the reported GMargins are 39.1% however this includes Dep&Amort expense). Operating expense grew slower than sales at 9.1% causing EBITDA margins to come in at 14.4% and up 70bps from last year’s Q3.

For Q3:3007, GAAP NI was $3.3M and up 30% YoY, eps came in at $0.52 (beating the single analyst estimate by 4c) and up 27% YoY. Operating EPS for the first nine months of 2007 is $0.77 up 28% YoY (actual eps in first nine month of 2006 was $0.67 however that includes a 7c tax benefit).

The balance sheet continues to be pristine with one small black mark. Cash is $4.7M with no debt. Inventory grew slower than sales. The one black mark is that A/R are up roughly 19% YoY vs. sales up 12% -- generally not considered a good sign but there is a lot of quarter-to-quarter noise in those numbers.

Revenue $36.87
GProfit 14.8 (reported GP includes effects of Dep, this number adds back dep)
SG&A 9.5
EBITDA $5.32

L9M EBITDA $8.51
L12M EBITDA $12.6

Q4 EPS estimate $0.45 (this is my estimate, analysts are currently at $0.39 but that is before the earnings announcement so I assume these will be increasing). To get here I assumed 10% revenue growth, small improvement in GMargin and EBITDA margins of 13.7% which is 75bps ahead of last years Q4.

2008 EBITDA Estimate $15.1
2008 EPS Estimate $1.35

So at this point you have BOOT trading at roughly $17.5 with 2008 estimated earnings of $1.35 which gives me a very reasonable forward multiple of 13x 2008 estimates. While all signs point to the company growing operating earnings 30% this year, this growth rate will slow down next year.

Assuming the positive upside momentum continues, I think a fair price to pay is somewhere between $17 to $20. I am not wildly excited paying 13x-15x forward cash earnings but would allocate new money to this stock since you do get a growing company, with premium brand names (ask any avid hunter about Danner boots) with growing margins, and a fortress balance sheet.

Going forward, I will be watching for trends in gross margins and SG&A as % of sales and if revenue is trending above or below the 8% level set by management as the goal. I will also be watching the change in A/R relative to sales.

To answer my own question posted in the beginning of this entry.....It did happen and I hope no one hears it. Continued ignorance about BOOT increases the probability of the stock trading to or below my next buy point at roughly $17.

* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.

Lack of posting .....

To the 5 people that are still regularly checking this blog .....thank you and I apologize for the lack of posting. I have been running at a pretty hectic pace lately with a lot of non-work and non-investment related issues taking up my free time.

So it appears that my blog schedule will be much like my personal investment schedule with periods of much productivity (not necessarily buying or selling stocks but researching) interjected with periods of little activity with little news flow from current holdings and little to be excited about in the way of new ideas.

There has been a lot of activity in the stocks I have written about on this blog:

INFS -- reported earnings today 10/30/07 and the stock popped 14%. Did not listen to the CC but my initial read is that things are heading in the right direction and the company could post a profit in the next 2 quarters.

BOOT -- reported earnings today 10/30/07 after market closed. By all indications the company blew away the quarter with something positive in every category. It will be interesting if the stock will move tomorrow considering there are some clear signs that NO ONE CARES about this company. There were only 300 shares traded today coming into the report which is low even for this company.

JCTCF -- reported earnings today 10/30/07 before the market opened. Skimmed over the release and while it looks like results were mixed, the story stays intact with higher margin non-wood products taking larger and larger portion of total sales and profits and still showing positive growth.

FTAR -- this is "the little engine that could" with the stock incrementally moving upward. The company has had zero in the way of newsflow since the last earnings release that I covered here but my guess that sales will be down more than the 9% decline booked last quarter. FTAR is right on the front lines of the recession selling low end footware to the lower end consumer. Plus the whether has been unseasonably warm which effect sales negatively.

CPY -- this is the stock with the most activity since I last posted on it on 6/11/2007. First, the stock is down to $33 from $71 on June 11th -- I bought for my personal account at $45 and $40 and will be looking to buy more. Second, the company completed the PCA acquisition and has started rolling out the digital upgrade. Third, Knightspoint has increased their ownership from 17% to 28% as the stock has fallen. I plan to devote more than a few post in the near future to this stock.

* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.