Stock Investment Lesson Pain

A.T. Cross Company: Consistently Healthy Sales Growth & Profit Margins

A.T. Cross Company: Consistently Healthy Sales Growth & Profit MarginsIntroduction:

A.T. Cross Company (NASDAQ:ATX), or “The Company”, designs and markets branded personal and business accessories worldwide. It offers writing instruments consisting of ball-point pens, fountain pens, rolling ball pens, and mechanical pencils; refillable writing instruments; and personal and business accessories, including leather goods, reading glasses, watches, desk sets, cuff links, and stationery under the Cross brand name. A.T.’s products are distributed in retail and corporate gift channels worldwide. The Company was founded in 1846 and is headquartered in Lincoln, Rhode Island.

Stock Snapshot:

The stock for A.T. Cross Company (NASDAQ:ATX) stood at USD 9.30, representing a market capitalization of USD 124.08 million. Over the last year the stock has traded between a range of USD 8.00 and USD 12.46. The stock has witnessed an average volume of 15,842 shares over the last three months. The stock has been trading at a P/E ratio of 13.53, a P/S ratio of 0.69, and a P/B ratio of 1.44. The Company has total shares outstanding amounting to 13.20 million, with a float of 9.45 million.

Competitor Analysis:

Photo-Me International plc (LON:PHTM) engages in the manufacture, operation, sale, and servicing of a range of instant service equipment. The stock for the Company stood at USD 49.6, with a total market capitalization of USD 179.7 million. The stock has been trading at a P/E ratio of1,240, a P/B ratio of 189.39 and a P/S ratio of 87.2.

Financial Analysis:

Revenue:

For 6MFY12, the consolidated net sales were recorded at USD 90.8 million, as compared to USD 87.6 million in the corresponding period last year. The sales in the Cross Accessories Division decreased by 5.7% in 6MFY12, as compared to the corresponding period last year, due to the adverse economic conditions affecting its European, Middle Eastern, and African markets.  During this same period, sales in Asian and American regions increased by 6.4% and 3.6% respectively.

Gross Margin:

For 6MFY12, consolidated gross margin was recorded at 56.6%, which was 120 basis points less than the gross margin achieved in the corresponding period last year. The gross margin for the Cross Accessories Division declined 190 basis points, due to inflation factors affecting 2012 that were not present in 2011. In addition, the sale of certain discontinued products at low margins during the period affected gross margin.  The gross margin for Cross Optical Group was recorded at 58.9%, which was 80 basis points lower than 2011, due largely to a shift in product mix from the Native line to Costa and Costa RX products.

Profitability:

For 6MFY12, the Company reported net income of USD 5.1 million, as compared to USD 4.4 million for the corresponding period last year; resulting in a YoY increase of approximately 15.9%. The Company reported basic earnings per share of USD 0.42 per share, as compared to USD 0.36 per share for the corresponding period last year.

Financial Position:

The Company reported  cash and short-term investment balances of USD 22.7 million as of June 30, 2012,  which decreased by  USD 3.3 million from December 31, 2011. The Company had a cash value per share of USD 1.58. Total debt stood at USD 17 million, resulting in a debt to equity ratio of 19.96.

Factors to Watch Out:

  • Strong sales growth and consistently healthy gross margins!

 

 

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