valuation metrics under a buyout scenario -- $32 to $36 per share
TRLG just reported a respectable quarter and gave 2013 guidance for 9% top line growth and 7% EPS growth. Backing into what those numbers imply for 2013 EBIT and EBITDA, I get about $83 million in EBIT and $97 million in EBITDA. At $25 per share (after hours) with roughly 25 million shares outstanding, the current market cap is $625 million, but since the company has about $215 million in cash (and no debt), the current enterprise value is only $410 million. EV of $410 million compared to $83 million in EBIT and $97 million in EBITDA translates to multiples of 4.9x EBIT and 4.2x EBITDA which is super cheap for a branded premium apparel company with 64% gross margins that is still growing.
As for buyout metrics, a typical luxury brand takeout valuation would be at least 7x EBITDA. That would translate to about $895 million for the stock (7 times $97 plus $215 cash), which is $35.75 per share. Being conservative and cutting the multiple to 6x EBITDA yields $31.88 per share.
So, if you believe a takeout is a legitimate possibility, TRLG offers nice upside is yet is well supported by operating fundamentals at $25 per share.
Your analysis is pretty much in line with mine, I hope we are right. I opened a 1000 share position yesterday at $23.60. Don't plan to stay too long one way or the other. However, I feel that TRLG is a very attractive opportunity for a private equity firm. besides the strong balance sheet and good cash flow valuation metrics that you pointed out, there is much untapped potential to the brand.