Read on Twitter
1) The company is part of a spin-off which forced the shares to decline up to - 40% at its bottom within 1 month post seperation.
2) prior to the spin-off, the Aaron's Holding consisted of Progressive Leasing and Aaron's Company.
3) Progressive Leasing was a digital high margin and high growth business...
4) while Aaron's Company is a boring, slow growing, omni-channel subprime retailer with a lease to own business Modell.
5) post acquisition everything indicated that most people would rather keep the progressive leasing and get rid of Aaron's Company...
6)... As the company had a goodwill write down of around 400 million, was just a fraction of the total value, no growth and with 600 in market value too small for some investors.
7) VALUATION: today, the company generates revenues of 1.6 billion and and adjusted EBIT of around $75 million (inkl. Restructuring charges). No interest to pay in the Future as the company is debt free. 20% Tax rate leaves 60 million in earnings
8) the company has 45 million in cash on the balance sheet and a market capitalization of 660 million. Therefore, trading at around 10x Earnings
9) the management is slimming down the current portfolio and targets a fcf of 90 million until 2025
10) the management communicated 5 positive comps over the last 7 quarters and the online business is growing double digit.
11) after stabilizing the business, it should be worth at least 50% above the current price and could return more than 200% over the next 5 years if AAN achieves its target of 90 million in fcf.
12) risks: The management might not be able to stabilize the business and therefore, the current valuation would be fair.
13) management is paid on EBITDA targets and only a few RSUs and options.
14) I'll have to track how much cash AAN realizes over the next few quarters and I'm not super high confident about that case. Hence invested a smaller portion of my portfolio than regularly.
