Best Buy (BBY) Could Draw 60% Premium in Potential Takeover
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Price: $85.35 +2.83%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 5.3%
Revenue Growth %: +1.1%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 5.3%
Revenue Growth %: +1.1%
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When it comes to investments, private equity firms generally don't fool around. And Best Buy (NYSE: BBY) is starting to look like a serious investment.
According to Bloomberg early Thursday, Best Buys 33 percent drop through 2011 makes its valuation compelling, all while the big box retailer continues to throw off cash. Best Buy is currently trading for just 3.6 times free cash flow (FCF), and has generated $2.44 billion of FCF over the last year.
Despite seeing increased competition from retailers like Wal-mart (NYSE: WMT) and Amazon (Nasdaq: AMZN), lagging demand for HDTVs, and lower comps over the last five of six quarters, it may now be at a point that a leveraged buyout (LBO) may be in consideration for many firms.
Bloomberg quoted Thornburg Investment Management in saying Best Buy could fetch $37 per share in a takeover, about 60 percent above its current trading range.
Here's a few metrics to consider: Best Buy is trading for just 3.6 times cash from operations, excluding capital expenses of $6.46 per share, and 2.8 times EBITDA, which is its lowest level since 1990.
Lack of intriguing products has also caused sales to slump. One analyst from Oppenheimer & Co. said a buyout firm could close stores and replace management in order to cut costs and streamline operations.
Today being the anniversary of its latest 52-week high, at $36.33, investors hope action is taken, and soon. Shares of Best Buy are indicated lower early Thursday.
According to Bloomberg early Thursday, Best Buys 33 percent drop through 2011 makes its valuation compelling, all while the big box retailer continues to throw off cash. Best Buy is currently trading for just 3.6 times free cash flow (FCF), and has generated $2.44 billion of FCF over the last year.
Despite seeing increased competition from retailers like Wal-mart (NYSE: WMT) and Amazon (Nasdaq: AMZN), lagging demand for HDTVs, and lower comps over the last five of six quarters, it may now be at a point that a leveraged buyout (LBO) may be in consideration for many firms.
Bloomberg quoted Thornburg Investment Management in saying Best Buy could fetch $37 per share in a takeover, about 60 percent above its current trading range.
Here's a few metrics to consider: Best Buy is trading for just 3.6 times cash from operations, excluding capital expenses of $6.46 per share, and 2.8 times EBITDA, which is its lowest level since 1990.
Lack of intriguing products has also caused sales to slump. One analyst from Oppenheimer & Co. said a buyout firm could close stores and replace management in order to cut costs and streamline operations.
Today being the anniversary of its latest 52-week high, at $36.33, investors hope action is taken, and soon. Shares of Best Buy are indicated lower early Thursday.
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