Established: 1864, ASX code: CDO, homepage: www.coloradogroup.com.au

Overview:
Colorado Group Limited is a major player in Australian footwear and apparel retail sector. It operates over 400 stores in Australia and New Zealand. Its best know brands on the market are Colorado Adventurewear, Mathers Shoes, Williams the Shoeman, Dianna Ferrari and JAG.

Analysis of latest annual report (January 2006):

• Market Cap: Depending on the daily stock price the market cap of this company is about $400mil in about 94mil of outstanding shares.
• Shareholders Equity: $125mil making the stock’s book value approx. $1.33 per share (-16.54% growth on year ending January 2005). From that about $70.5mil. ($0.75 per share) is available working capital.
• Earnings per share: $0.37 making the average EPS growth in last 3 years about 16.7%
• Return on Equity: 28%, averaging over 27.3% in last 3 years
• Balance Sheet: Working capital of $70.5mil versus total debt of $1.2mil

Sharemarket’s view:
Average CDO’s Price to Earnings ratio of 9 suggests the share price around $3.35 ($0.37 EPS x 9 P/E)

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 8%
• Share price in 10 years time: about $7.3 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
• Total shareholders return in 10 years times: $10.15 (share price of $7.3 plus $2.85 of all the dividends if current payout ratio of 50% persists)
• Rate of Return in next 10 years based on the beginning of January 2007 price of $4.10 per share: 9.5%pa

PROS AND CONS:
+++ High Return on Equity
+++ Strong balance sheet
— Uncertainties coming from recent private equity takeover
— Low/negative EPS growth in coming years likely (negative EPS growth in 2005!) => Low Rate of Return
— Issuing new shares and rewarding its managers with stock options

Further information about Australian Stock Exchange www.asx.com.au

This entry was posted on Tuesday, January 16th, 2007 at 1:18 pm and is filed under Australian stock. You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.