DTEJD1997 Posted August 31, 2016 Share Posted August 31, 2016 How figure the ways that CHEF is overpriced.... You have made zero reference to CHEF's valuation. The only way your qualitative assertions make any sense is if CHEF is worth $0. OK: In case I couldn't make a point...how about this for valuation: A). Stock has a P/E of 65 B). Stock has no dividend, and thus no yield C). Stock is trading for 1.7x book value D). Stock has EV/EBITDA of close to 10....this is on DEPRESSED price! E). Stock has $350MM of debt vs. EBITDA of $62MM that is close to 6X F). Analysts are predicting earnings of about $.40/share this year and $.55/share next year. G). Operating margin is about 4%, net is about .4% H). I strongly suspect that a good chunk of book value ($6.93/share) is "goodwill" due to recent acquisitions.... I guess I'm just NOT smart enough to see where the bargain or value is here? Link to comment Share on other sites More sharing options...
KCLarkin Posted August 31, 2016 Share Posted August 31, 2016 I guess I'm just NOT smart enough to see where the bargain or value is here? The obvious question is whether current earnings are representative of future earnings power. If net margins are 0.4% in the future, I agree it is overvalued. If they revert to the 3% margins earned in 2012, the stock becomes more attractive. Link to comment Share on other sites More sharing options...
muscleman Posted September 1, 2016 Share Posted September 1, 2016 Would anyone want to shed some lights on the transaction bonus? :) http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/chef-the-chefs'-warehouse/msg273220/#msg273220 IMO, this is absolutely unacceptable, and immediately disqualifies CHEF as an investment. Just by reading this text, without face to face talking, I can't figure out if you are mocking or if you mean it. ::) Link to comment Share on other sites More sharing options...
KCLarkin Posted September 1, 2016 Share Posted September 1, 2016 IMO, this is absolutely unacceptable, and immediately disqualifies CHEF as an investment. Just by reading this text, without face to face talking, I can't figure out if you are mocking or if you mean it. ::) The first goal of investment is preservation of capital. After seeing this transaction bonus (and management track record), can you trust the management and board to act as stewards of your capital? Specifically, can you trust them to: - avoid value destroying acquisitions - avoid transferring wealth from shareholders to management My answer is no. So this stock is not investment-grade. On the other hand, there are many things that make it an interesting speculation. Link to comment Share on other sites More sharing options...
muscleman Posted September 1, 2016 Share Posted September 1, 2016 IMO, this is absolutely unacceptable, and immediately disqualifies CHEF as an investment. Just by reading this text, without face to face talking, I can't figure out if you are mocking or if you mean it. ::) The first goal of investment is preservation of capital. After seeing this transaction bonus (and management track record), can you trust the management and board to act as stewards of your capital? Specifically, can you trust them to: - avoid value destroying acquisitions - avoid transferring wealth from shareholders to management My answer is no. So this stock is not investment-grade. On the other hand, there are many things that make it an interesting speculation. I see what you mean. Thanks! Link to comment Share on other sites More sharing options...
DTEJD1997 Posted September 1, 2016 Share Posted September 1, 2016 I guess I'm just NOT smart enough to see where the bargain or value is here? The obvious question is whether current earnings are representative of future earnings power. If net margins are 0.4% in the future, I agree it is overvalued. If they revert to the 3% margins earned in 2012, the stock becomes more attractive. If margins revert back to 3% net, then yes, the stock is not as highly overvalued as I ascertain it to be... HOWEVER: if they DO go to 3%, it would simply be "moderately" valued in my opinion. At this juncture, each share of CHEF has about $43 in sales behind it. Put 3% on that, and you will get about $1.25 in earnings. That will give CHEF a FUTURE P/E of about 9. That is assuming that everything goes right. HOWEVER, I am a value investor. I am looking to get the most bang for my buck, so to speak. I really only get excited when I can find stocks with VERY LOW single digit P/E's. As an example, NICK is having INCREDIBLE write-offs in a very challenged industry. It is trading WELL BELOW a conservative book value and has a P/E of about 7. What if NICK could catch a break? It would probably be trading for a P/E of 4.5 or 5. I've got other stocks that I own, and am in the process of analyzing, that have P/E's of 2-3-4... Lastly, I would be surprised if CHEF can reach and maintain NET margins of 3%. They are a wholesale grocery distributor. The industry typically has margins of 1% or less. CHEF operates in a "niche", so I'll give them the benefit of the doubt and say they can have higher margins than somebody selling canned beans and catsup....but I still don't think they can do 3%. 1.5% Yes, maybe, 2% OK, maybe....3%? Not so sure... Link to comment Share on other sites More sharing options...
eclecticvalue Posted September 1, 2016 Share Posted September 1, 2016 I've got other stocks that I own, and am in the process of analyzing, that have P/E's of 2-3-4... Can you tell us or me? I will send you some of my ideas if you want. Link to comment Share on other sites More sharing options...
KCLarkin Posted September 1, 2016 Share Posted September 1, 2016 Lastly, I would be surprised if CHEF can reach and maintain NET margins of 3%. They are a wholesale grocery distributor. The industry typically has margins of 1% or less. CHEF operates in a "niche", so I'll give them the benefit of the doubt and say they can have higher margins than somebody selling canned beans and catsup....but I still don't think they can do 3%. 1.5% Yes, maybe, 2% OK, maybe....3%? Not so sure... Sure but that's the analysis required here. What does this business look like in steady state? Can their centre of the plate business recover? Is the acquisition strategy creating value or destroying value? Can they support the debt? This is, perhaps, more difficult than buying Nick at 7x and hoping that the loan book doesn't fall of a cliff. But it is impossible to say that CHEF is "overpriced" without doing that analysis. Link to comment Share on other sites More sharing options...
Guest roark33 Posted November 16, 2016 Share Posted November 16, 2016 http://investors.chefswarehouse.com/releasedetail.cfm?ReleaseID=997123 Their results just keep getting worse and now that Mecham sold out, why should upstanding value investors own this? Link to comment Share on other sites More sharing options...
KCLarkin Posted December 15, 2016 Share Posted December 15, 2016 http://investors.chefswarehouse.com/releasedetail.cfm?ReleaseID=997123 Their results just keep getting worse and now that Mecham sold out, why should upstanding value investors own this? And of course it is up 37% since earnings. Link to comment Share on other sites More sharing options...
spartansaver Posted February 4, 2017 Share Posted February 4, 2017 One of the risk factors that CHEF states is group purchase organizations (GPO) becoming more active in the industry. - GPOs add restaurants to their network and as their network increases, they are able to demand better purchasing terms on their customers behalf. If these organizations become more prevalent, you may have more customer concentration and greater customer purchasing power. How are you thinking through this risk, or do you deem it a small probability of happening on a large scale? Link to comment Share on other sites More sharing options...
Txvestor Posted February 21, 2017 Share Posted February 21, 2017 A beat on the top and bottom line today. Looks like protein business and margins improved a bit and they are making some progress on the integration efforts of their acquisitions. Provided 2017 gauidance that looked fair, and beatable with any updraft in either inflation or economic growth. http://www.streetinsider.com/dr/news.php?id=12573658 Link to comment Share on other sites More sharing options...
Guest roark33 Posted February 21, 2017 Share Posted February 21, 2017 The Company estimates that extra week contributed approximately $24.1 million of net sales to the fourth quarter. The remaining sales growth of $16.0 million, or 5.5% resulted from the acquisition of M.T. Food Service, Inc. on June 27, 2016. I am not sure how this is anything but meh....extra week and growth by acquisition, at least it isn't getting worse? Link to comment Share on other sites More sharing options...
kab60 Posted March 19, 2020 Share Posted March 19, 2020 This has been Aercapped! Anyone up to speed? Fear of liquidity squeeze it seems Link to comment Share on other sites More sharing options...
KCLarkin Posted March 19, 2020 Share Posted March 19, 2020 This has been Aercapped! Anyone up to speed? Fear of liquidity squeeze it seems Not up-to-date, but they seem to be in a very tough place. Much of their inventory is perishable. Their clients are at risk of bankruptcy. Sales are dropping overnight. They will probably need to write-off A/R. And they have a lot of debt. I assume they will need to raise equity to shore up the balance sheet. Link to comment Share on other sites More sharing options...
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