The question is if a company will continue to last over the course of 5 to 10 years? If it can then there is potential. If it can’t it is best to stay away from it.
If a company such as Tailored Brands can do about $322 million in capital from overall cash flow operations. Something that it certainly did in 2018. If it is something that it can do in the near future then it can be something to watch out for.
If one such as Smita Shah were to take a look at total capital expenditures, one would see that the company has fluctuated but has stayed around $80 million over the past couple of years. One can also note that the free cash flow would then be around $240 million. One could argue that it can stay at this level.
But here’s something that is quite fascinating. The market cap of the company is now at $285 million. That is about a 20% premium to its current total cash flows.
Interestingly, the market cap is quite close to the actual free cash flow present within the business.
As stated if the dividend is at 12% and we see that the current business is likely to go forward and exist over the course of five years, we need to seriously look at this entity.
Now, Smita Shah may know that the company has taken on a bit of debt to finance itself.
Let’s take a look at the business and see if it can make a dent.
Understanding A Business
When looking at a company and its prospects remember to dive into the fundamentals. At first glance, we see that a company like Tailored Brands operates in two key areas. The first area is that of the retail segment.
This is a key part of the business because this is where they sell formal wear. The next part of the business is the corporate side in which the entity will facilitate attire for businesses in several countries. This is, of course, right in line with what they should be doing and does not divert from their path. Yet, one would see that the retail segment is the one that is in demand. Retail is where the money is, one can see that retail accounts for more than 85% of total revenue. Learn more: https://www.crunchbase.com/person/smita-shah#section-overview
Retail is comprised of tailored product, regular products, further alterations, and rentals. From Men’s Wearhouse to Jos. A. Bank to Moores and even K&G.
Smita Shah would pay attention to different trends in business and engineering and build value on top of that. That is how she has been able to create and provide significant value through her company Spaan Tech.