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Appliances Cooking on Wall Street

As appliances work overtime in holiday-minded homes across America, it seems the Wall Street variety is cooking in kind. This as investment analyst and strategist Brent Wilsey of Wilsey Asset Management has identified a bevy of buys in the category, including the three below.

1) Lifetime Brands (NYSE: LCUT) Rating: Buy – When cooking in the kitchen this Thanksgiving, you may find yourself using a Lifetime Brand utensil. The company has licenses with companies such as KitchenAid, Farberware, and Sabatier. The current P/E of 15.6 is favorable compared to the industry average of 24.9. Price/Sales of 0.4 looks phenomenal as it is well below the industry average of 2.9. Price/Tangible Book Value of 2.1 is favorable compared to an industry that is not material and Price/Cash Flow of 9.0 also looks good as it is below the industry average of 18.8. Sales have climbed 0.9% over the last 12 months and EPS has risen 29.1% during the same time frame. Given the wide discrepancy between the two growth rates, much of the EPS growth was most likely due to accounting rules. The balance sheet looks strong for the company as the current ratio is 3.3 and debt/equity is 61.8%. Looking forward to December 2018, estimated EPS of $1.55 would give us a target sell price of $25.58. An area of concern with this company is that it is small with a market cap of $245 million and it has just one analyst following it.

2) Whirlpool (NYSE: WHR) Rating: Buy – Whirlpool manufactures home appliances such as refrigerators, freezers, and cooking appliances under popular brand names such as Whirlpool, Maytag, and KitchenAid. The valuation ratios are a positive for the company as the current P/E of 15.5 is the same as the industry average; Price/Sales of 0.6 is favorable against an industry average of 0.8; and Price/Cash Flow of 8.2 is inexpensive compared to the industry average of 10.9. The company pays a nice dividend of 2.7% and it has a reasonable payout ratio of 39.6%. Sales have climbed for WHR by 2.8% over the last 12 months, but EPS has declined by 7.5% over the same time frame. One area of caution would be the balance sheet, there is currently no tangible equity due to the company’s acquisitions. The company also has a low current ratio of 0.9. Much of this can be attributed to the short-term debt on the balance sheet. The current Long-Term Debt/Equity stands at 77.2%, but Total Debt/Equity is 121.7%. This total debt level is a little higher than I would like to see, and I would want to know what the company plans to do with the short-term debt that is coming due within the next 12 months. If I look out to December 2018, estimated GAAP EPS of $14.73 would give me a target sell price of $243.05.

3) Best Buy (NYSE: BBY) Rating: Buy – On top of the electronics offerings, Best Buy has recently made a big push into appliances. The company has also made some changes to its business model which has helped sales grow nearly 2% over the last 12 months. It has done a great job reducing unnecessary expenses and EPS has catapulted 21.5% over the last 12 months. The balance sheet is a major strength for the company as it has a current ratio of 1.3 and debt/equity of 32.0%. The dividend yield of 2.4% is a nice addition to the stock and the company uses just 23.9% of earnings to pay out that dividend. Looking at the valuations: the P/E of 14.3 is the same as the industry average; Price/Sales of 0.4 is slightly above the industry average of 0.3; Price/Tangible Book Value of 4.5 is slightly higher than the industry average of 4.3; and Price/Cash Flow of 8.8 is above the industry average of 7.1. Best Buy is part of an industry with very strong valuations and although they are slightly above the industry I am all right with Best Buy’s current valuations. Looking forward to January 2019, estimated GAAP EPS of $4.26 gives me a target sell price of $70.29.

Source: Brent M. Wilsey is a highly regarded registered investment advisor and a seasoned financial strategist with over 40 years of experience in the field. Wilsey currently owns and operates San Diego-based Wilsey Asset Management through which he offers day-to-day investment guidance to both individual investors and corporations. To view investment services provided by Wilsey Asset Management visit www.wilseyassetmanagement.com.

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