April 29, 2022
There are many stories the market is trying to sell you. A lot of these stories are generated by sell-side analysts. Do not buy them. Or at least double check what they are selling you.
For example, Columbia Sportswear reported first quarter results yesterday, April 28th, 2022 and beat analyst estimates. Earnings per share came in at $1.03 versus consensus $0.86 while revenues were in-line with analyst estimates.
Company also repurchased $200 million worth of shares in the first quarter and announced an additional share repurchase authorization in the amount of $500 million. Projections for full year earnings and diluted earnings per share were increased and company reiterated net sales outlook. Company guided that net sales would grow 16-18% percent in 2022 to $3.63-3.69 billion while operating income is expected to be in the range of $477 to $502 million.
In addition to share buyback, Columbia Sportswear pays a quarterly dividend of $0.30 per share which provides an annual dividend yield of about 1.4% percent.
Do not buy those stories!
Columbia Sportswear is currently ($85 per share) is valued at an EV/EBITDA multiple of x8.6 (FY 2021 EBITDA). Using our valuation assumptions and applying an EV/EBITDA valuation of multiple of x12.5 we believe that shares of Columbia Sportswear could be valued at $168 per share in three years.
This would provide an upside of 100% or approximately 33% percent annual return.
We therefore believe that you should not buy the stories some sell-side analysts are trying to sell you and instead focus on real and true story – attractive valuation multiple, earnings beat and share buyback.