TUES - Tuesday Morning Corp

**dchamber** Tue Feb 07, 2006 12:18 pm

TUES - Tuesday Morning Corp
What about TUES?
The P/E is 14.3 with an average of 22 since 1999.

Analysts estimate a 16.4% average annual EPS growth rate. This could produce an annualized gain of over 23% if they are trading at their average P/E of 22.

If they only trade at their industry average of 18 and I reduce the growth rate to 12% this would still be more than an 18% return.

They had total liabilities that total assets through 2000. Most of the problem was long term debt which was 0 in 2003 and 2004. It looks like they have taken on some debt in the last 2 quarters but not a lot. They have a current ration of 2.1.

Both ROE and Book Value where negative before 2000. Since that year ROE has been over 30% each year (thru 2004) with an average of 72%. Book value has also increased each year at rate of more than 75% since 200.

I’m much better at valuing larger, stable companies and have little experience with these smaller growth companies. Any opinions are welcomed.

**blast_investor** Tue Feb 07, 2006 4:33 pm

RED FLAG

:D

I have to put red flag on this stock Tuesday Morning (TUES).

The earning of this stock is up huge year over year, and the cashflow of this stock is down big year over year.

The inventory level is up big recently. This phenomena is similar to "channel stuffing". "channel stuffing" is fraudulent, inventory over built up is legal. But result is same, the company is making more than it can sell. I see trouble ahead for this stock. The quality of earning and earning growth of ths company is pretty poor.

I don't believe any growth estimate from Wall Street analysts on this stock.

**blast_investor** Tue Feb 07, 2006 4:48 pm

To complete the story, insiders of this stock TUES are dumping their shares big.

If I am a shareholder of this stock TUES, I would sell my shares immediately right now when the price is still dear.

**blast_investor** Tue Feb 07, 2006 8:10 pm

For those who are not familiar with concept of "Channel Stuffing", here is definition of it:
http://value-investing-forum.com/viewtopic.php?t=760

**goog** Wed Feb 08, 2006 2:43 pm

TUES is a retailer and add inventory won't inflate earning as inventory is caculated as the lower of cost or market value. I think high inventory could be bad or good:
bad: the sales were lower than expected, there could be some mark down in the future if they can't sell.
or
good: company foresees that the sales are going to increase in the near future so they stack up inventory in advance

**goog** Wed Feb 08, 2006 2:57 pm

From the 10-k, the turnover decreased from 3.2 to 2.8. This could be the main reason. They didn't sell fast enough. I would worry about the future growth.

**blast_investor** Wed Feb 08, 2006 3:34 pm

TUES inventory growth is "abnormally" high, that is usually bad. I do not see any good side from it.

A little bit high is OK, 1 quarter high is OK. But TUES inventory is not "little", it is getting much higher over past serveral quarters. The problem is much worse than the company already disclosed in the press release.

Inventory from TUES like business is not worth that much. The inventory can lose majority of the booked value in balance sheet.

**goog** Wed Feb 08, 2006 4:07 pm

The sales for this retailer are seasonal. Compare quartely year over year and I see the inventory increases indicate another turnover rate drop in 05 offset by a small sale increase:

Dec Mar June Sep

03/04 143 195 204 262
04/05 189 212 207 293

I would agree with Blast this is not a good value pick.