17% of market cap of CBRL today is $253 M
So BH has $237 cash per share per Yahoo finance statistics tab, plus $253 M stake in CBRL, and yet trades at only $512M market cap?
Sounds like the Steak & Shake and Sizzlin locations, and their future cash flow, are being valued as a negative number by Wall Street ? Perhaps BH should annouce a stock buyback ?! Maybe I am missing something, perhaps the MBA's and can explain the arithmetic to me, because if you don't I will be buying BH stock.
doesnt mean anything until he sells it...........not going to happen all at once and if he sell sporadically the price will fall...The $253 stake of CBRL is not all profit, hardly. Not sure of the exact cost but somewhere @ $200mil .....SB is risking everything on this....Just 1 little problem and its all gone , BH too.....I don't understand why CBRL doesnt buy BH...
"So BH has $237 cash per share per Yahoo finance statistics tab"
They also have $236 mil in debt. I've owned CBRL for some time now. CBRL carries a bunch of debt. They have the rates hedged, but they should still focus on paying it down IMHO. At a glance, I'm coming up with a overall P/E of 14 to 15 after backing out yearly investment gains at BH, and using an equity method for 17% CBRL earnings.
1. Take his average FCF for the past three years - roughly $50mm and get the FV value at a reasonable 8% (net margin) growth rate, 10 years out... FV=$792mm
2. Discount that back by a harsh 12% discount rate....PV=$255mm
3. Now let's be real harsh and only value all assets minus cash and short term investment @ 10% of book value...Being excessively harsh really points to how cheap this stock is... = $336mm
4. Add 2. + 3. = $591mm
5. Compare Market Cap. ---- $435mm vs. $591mm = - 26.4% (lets call this " The Biggie Discount")...A direct reflection of what the market thinks about him right now.
Because either a. The market is considering the restaurant business is crap, or b. his investing skills are being negatively valued.
Considering a. is false....he would have to lose roughly 35% on his CBRL investment to make 4. and 5. converge.
Considering b. is false....Steak n' Shake is doing very bad, because if you back out the roughly $280mm in cash and short term investments, you're left with a restaurant business value of $155mm (per the $435mm market cap)...which is below 1. with a 0% growth rate (its actually -2.8% to be exact - using the harsh and some what arbitrary 12% discount rate).
If you're even slightly more positive on this company, i.e. you think they can grow at or above 8%, are comfortable discounting by a smaller rate, and don't value the assets at fire sale prices, you'll get a much larger value for BH. Probably something around 15% higher then 4.