Joes Jeans [NASDAQ:JOEZ] – “Light Smoke – Heavy Mirrors” – Stock Valuation Analysis

Joez Stock Graph

Joes Jeans [NASDAQ:JOEZ]

“Light Smoke – Heavy Mirrors”

Prospective holding for the J’s Journal small cap portfolio is Joes Jeans. While the chart looks intimidating [see below] and gives an uncanny resemblance of trying to “catch a falling knife.” Its actually a strong company that has given small time investors worry… inciting them to prematurely sell shares. On July ~15th Joes Jeans announced quarterly earnings at $.02 per share. Not bad for Q2 earnings since its the 3rd out of 4th slowest quarter of the year [q4 : XMAS season].

WHAT HAS HAPPENED:

During the quarterly report and announcing positive earnings Joes Jeans has announced that they would like to purchase “Hudson Jeans Co.” For a price of $97.5m. [REFERENCE GREEN CIRCLE BELOW] … meaning that Joes Jeans will be trying to buy a company larger than its own self.

WHY:

Well I WOULD LIKE TO SAY THAT Hudson is a good purchase but in this case it is not. AND I BELIEVE THAT MANAGEMENT KNOWS THIS…and is abusing their insider power Joes Jeans has ~15m cash on hand, and 22.3m in total liabilities.

WHY THE HUDSON LBO IS NOT A GOOD IDEA:

Joes Jeans would in essence have to LBO around $85m in order to purchase this company. An interest rate at around 10‐12% is most likely to occur. Meaning that Hudson would have to make an ROI of around 15% to break even on the interest payments of this loan.

HOW DO WE MOVE FORWARD:

I am a buyer at a price between 1.10 to 1.15 ONLY IF: We notice that management makes new share purchases or if “Institutional Ownership” increases. {Still at 17% during the 40% price retraction]

THE IDEAL SITUATION:

Joes Jeans Management purchases are seen and institutional investment is made; we purchase shares at the 1.10 level. management then decides to cancel the LBO. Effectively it will shoot the stock up to the 1.70 price level as seen before the recent buyout announcement. Its is my feeling that management is abusing their insider power and trying to increase their equity stake with this announcement and retraction. Don’t put it past Wall Street Greed, this is a common tactic that has been seen during the years of 83‐87 and 96‐00.

Break

Disclosures

Seal of Approval

SM Call Signs

References_Logo

Important NASDAQ:JOEZ Resource Pages on:

Yahoo Finance | Google Finance | Morningstar

Joes Jeans Main Page | Joes Jeans Investor Relations

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST

Copyright © 2013 Fat Pitch Investments. All Rights reserved. This material is for your information only and is not a solicitation, or an offer, to buy or sell securities mentioned in articles past, present or future. Fat Pitch Investments is a firm involved with equity research and valuations. The information contained herein has been obtained from sources that we believe are reliable but in no way is guaranteed by us. Furthermore, this report contains forward looking statements and projections that are based on certain assumptions and expectations that are generated by our proprietary research process. Accordingly, actual results may differ considerably from those reflected in this report due to such factors as those which are listed in the Company’s SEC filings. Any non-factual information in the report is our opinion and is subject to change without notice.

NASDAQ:JOEZ – NASDAQ:JOEZ – NASDAQ:JOEZ – NASDAQ:JOEZ – NASDAQ:JOEZ – NASDAQ:JOEZ

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