Signet: (SIG)
Investor fear has been overdone and left the shares incredibly undervalued.
Initiatives to enhance shareholder value: large stock buyback, debt repayment, and a dividend raise.
Overview of the current situation and the best way for investors to participate.
“I wait until there is money lying in the corner and all I have to do is go pick it up. I do nothing in the meantime.”
-Jim Rodgers - MarketWizards
Summary:
Shares in Signet have fallen by nearly 50% this year. The company is in the process of selling its financing portfolio and will have tremendous flexibility to retire debt and pursue significant buybacks. Strong cash flows and significant liquidity has been ignored and left the shares incredibly undervalued. Management is taking numerous moves to enhance shareholder value including debt repayment, raising the dividend, and a large stock buyback.
As such, the risk/ reward is very attractive at current levels. The best way for investors to participate in the stock and take advantage of elevated implied volatility.
About Signet: (SIG)
Signet is the largest specialty retail jeweler by sales in the US, Canada, and the U.K.
On May 29, 2014, the company acquired Zale Corporation for $1.458 billion. The company issued $1.4 billion of long-term debt to fund the purchase.
The Sterling Jewelers division: formerly the US division, operates 1,588 stores in all 50 states. Its stores operate nationally in malls and off-mall locations as Kay Jewelers, and regionally under a number of well-established mall-based brands.
Destination superstores operate nationwide as Jared The Galleria Of Jewelry.
The Zale division consists of two reportable segments: Zale Jewelry, which operated 970 jewelry stores at January 28, 2017, is located primarily in shopping malls throughout the U.S., Canada. and Puerto Rico.
Zale Jewelry includes national brands Zales Jewelers, Zales Outlet and Peoples Jewellers, along with regional brands Gordon's Jewelers and Mappins Jewellers. Piercing Pagoda, which operated 616 mall-based kiosks at January 28, 2017, is located primarily in shopping malls throughout the U.S. and Puerto Rico.
The U.K. Jewelry division, operated 508 stores at January 28, 2017. Its stores operate in major regional shopping malls and prime locations.
Overview:
Shares of Signet have had a sizeable decline relative to the…
Interesting observations. Thank you, Professor. On 24th May 2018 - at the time you wrote your post - the share price was $42.4 and, after rising to $67.5 it has fallen to a current value of $24.3. The price to tangible book value is currently 1.13 whilst the price to book value is 0.64. At the moment it's on a sharp downtrend and it may well reach $20 at which point it would become attractive to value investors. (It also pays a dividend of 6% although it may not continue to do so.) The business is thriving and it maintains high revenues despite its large debts and lack of profit. People continue to buy jewellery (jewelry). I've put it on my watchlist.
