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Flexsteel Industries Inc. Message Board

  • doubledownposse doubledownposse Jan 12, 2008 3:16 AM Flag

    I had to find my old posts to see how long it had been

    I was long this stock about 5 years ago and if I recall correctly, I made a very scant profit on it.

    Anyway, it's still cheap. But, business stinks and their returns on sales and equity are terrible.

    Is this thing ever going to return more than dividends?

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    • If you go to and select investors tab, there are a bunch of data on how much they have spent for track.

      Here is the 10k from last year. My interpretation of the data in the 10K is an average of $2M/mile over the past several years of capex. They also spent $1B for 500 miles of double tracking per a presentation they gave to Citigroup. That also averages $2M/mile.

      On average my assumption is $2M/mile of track and they have over 30K miles of track. That is $60 B. Add in trains, cars, stations, and net out debt and you're still over $60B. The market cap is under $30B. I have not added in anything for land. But basically the whole discussion is moot because you couldn't recreate this company for any price unless you wanted to pay to rebuild some major cities.

      I agree comparing discounts to working capital and discounts to replacement value are apples and oranges.

      The value in BNI is really their cost advantage and ability to move strategic assets of the and food.

      A big potential fly in the ointment is this whole carbon credit program and the potential for regulation of coal fired power plants.

    • doubledownposse:

      Asset replacement cost is a different thing than a discount to net working capital. I am assuming that you didn't determine the asset replacement cost on your own, so who did you rely on to do that for you? Do they know what they are talking about? I don't know how to value railroad tracks and choo-choo trains. Railroad tracks and engines have value to only a select group of railroad companies.

      I did a one day trade in BNI at its last earnings report and made out rather well. I very rarely do that. I want to buy it again but I have been debating with myself what price to pay. WEB seems determined to keep buying it.

    • Oh another book value gem is BNI.

      It sells for about 40% of asset replacement cost.

      That doesn't mean much by itself but I am quite heavily long that one.

    • That ITIC is cheap. I own some WSC. Book is around $360 there and it sells for $380. So you pay a tiny amount for Munger.

      I bought some TUES when it was selling for around net working capital in the low 4's, but now it has rebounded some. It is not a great outfit though.

      I'll keep looking!

    • doubledownposse:

      Well FLXS's income statement for the year ended 6-30-07 indicates that they made $9,000,000 which I would characterize as more than a "few million". Nevertheless, I won't disagree that they do have low margins.

      However, I would like to point out that their balance sheet is unburdened with goodwill and other no value intangibles which they deserve some credit for. Besides dividends do not lie and they can not be reclaimed by the company. FLXS also does not do the routine multiple one-time charges that many other company's resort to and expect the shareholders to ignore.

      I have been a follower of Graham and Buffett for many years so I know what you are talking about. Can you tell me any other good companies that you know of that sell for a similar valuation as FLXS?

      I am also interested in SNS, SUP, ITIC and WSC but none of them sell with a comparable yield and discount to net working capital like FLXS. Some of those mentioned have better operating records.

    • PMLLJL..

      I am separating them...they make very low margins. It is a lot of work to do $400 million in business and only make a few million profit. Low return on equity here.

      But for the price I paid I receive a 4.6% yield and a market value around 75% of working capital.

      It is hard to lose money on that sort of deal unless the business collapses. Ben Graham did some studies on investments like this and in almost all cases money wasn't lost.

    • doubledownposse:

      I think you bought at a good price.

      I also think you need to rate the performance of the company separately from the performance of the stock price. The management is responsible for the company's performance but not the stock price in the short term. The company has actually not performed too badly in a very difficult period for its industry. In fact, if you had bought FLXS for its current price at any time since 12-31-99, the dividends alone would have outperformed the S and P index since 12-31-99.

      I am currently trying to increase my position in FLXS and hoping for the price to decline. However, I am beginning to believe that we may have seen the bottom because of the Fed cutting interest rates and the governments attempts to stimulate the economy. Interest rates on three month and six month US treasury bills are currently below 2 and 1/2% and FLXS's yield of more than 4% looks very competitive.

    • double:

      What is wrong with dividends. If it gets to $10, the yield will be 5.2%. I don't know where I would get that and still have a pretty good chance for price appreciation.

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