July 12, 2007

Casual Male

From the Fool:

Two stars? Sorry, I don't see it. Return on capital has been on the rise since 2005. Gross margin is expanding faster than America's collective waistline. And owner earnings topped $33.5 million in the last 12 months alone. Pretty impressive for a firm that commands just $439 million in market cap, wouldn't you say?

I would. And so would CAPS All-Star jtallenmd, who in February proclaimed Casual Male's intrinsic value to be "at least $24." I'd agree, except that he may be lowballing it. Assuming 17% dilution for each of the next five years and 22.5% cash flow growth over the same period, Casual Male is worth more than $32 a share, by my math.

One insider with a handle on numbers seems to agree. On Thursday, senior vice president and controller Sheri Knight opened a direct position in Casual Male by purchasing 1,000 shares on the open market.

So, who's right? Bears or bulls? Between the valuation and the insider buying, I'm inclined to side with the snorters. Look for Casual Male to make an appearance in my CAPS portfolio today.

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