AAN
Aaron's Inc
Consumer
11/05/2018
Presented
| Date | 10/30/2018 |
| Price | $45.83 |
| Market Cap | $3.14B |
| Ent Value | $4.08B |
| P/E Ratio | 10.54x |
| Book Value | $25.71 |
| Div Yield | 0.26% |
| Shares O/S | 68.60M |
| Ave Daily Vol | 585,258 |
| Short Int | 3.33% |
Current
| Price | $10.09 |
| Market Cap | $0.32B |
| Aaron's, Inc. retails consumer electronics, computers, residential furniture, household appliances, and accessories. It engages in the lease ownership, lease and retail sale of products such as widescreen and liquid crystal display televisions, computers, living room, dining room and bedroom furniture, washers, dryers, and refrigerators. The company operates through the following segments: Sales and Lease Ownership, Progressive, DAMI, Franchise, and Manufacturing. The Sales and Lease Ownership segment offers electronics, furniture, appliances, and computers. The Progressive segment involves a lease-purchase option for customers to acquire goods. The Franchise segment awards franchises and supports franchisees of sales and lease ownership concept. The Manufacturing segment manufactures upholstered furniture and bedding. Aarons was founded by R. Charles Loudermilk, Sr. in 1955 and is headquartered in Atlanta, GA. |
Publicly traded companies mentioned herein: Aaron’s Inc (AAN), Amazon.com Inc (AMZN), Best Buy Co Inc (BBY), Big Lots Inc (BIG), Conn’s Inc (CONN), Home Depot Inc (HD), J C Penney Company Inc (JCP), Lowe’s Companies Inc (LOW), Overstock.com Inc (OSTK), Rent-A-Center Inc (RCII), Synchrony Financial (SYF), Walmart Inc (WMT)
Highlights
The presenter is long shares of Aaron’s (AAN), the lease/rent-to-own retailer that acquired Progressive Finance Holdings in early 2015 in a ~$700MM deal. Despite the negative perception of businesses that offer flexible payment options to credit-challenged consumers, the risk appears to be “priced correctly” in this case, at 14x current year, and 12x forward earnings. Patient/understanding shareholders could see a 35% - 40% gain over the next 12 - 24 months, and possibly a 2x - 3x return longer-term if the management team can execute and transition the business to more of a B2B, vs. B2C model. If any of AAN’s large pilot programs, with companies such as JC Penney, Lowe’s, and others, go from test phase to formal “partnerships” it could transform the business. With a risk/reward range of 10x - 15x on $4 of expected EPS ($0.20 ahead of the Street) in 2019, and the stock at ~$44 today, the entry point looks good to the presenter.
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