Le Chateau Inc.

Sound bite for Twitter and StockTwits is: Cheap for a reason. This company has declining Revenue and Book Value plus negative earnings and cash flow. The long term debt has just increased by some 400%. Stock is certainly cheap for a reason. See my spreadsheet on Le Chateau Inc. .

I do not own this stock of Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF). In June 10, 2012 I started spreadsheet because of a request from Blog reader. It was also on my list of dividend and special dividend paying stocks from a column Jennifer Dowty wrote about Dividend Paying stocks in 2010.

Actually I am rather shocked company that this stock is still around. It is still bleeding revenue so it has not turned around. They are trying. Also their earnings, cash flow and stock price is still tracking lower. A worrisome development is long term debt has increases between last year and this by some 400% and the Long Term Debt/Market Cap Ratio is 3.61. It is always worrisome when this ratio is 1.00 and above.

Their Liquidity Ratio has been holding up well with the one for the financial year ending in January 2016 at 3.24 and a 5 year median of 3.13. However, the Debt Ratio is tracking lower with the one for January 2016 at 1.56 and a 5 year median at 2.66. Often companies in volatile industries have high debt ratios in order to survive the bad times in good shape.

There is a lot of stock price testing that cannot be done because the earnings have been negative for a few years and they have cut their dividends. We can do not valid Price/Earnings per Share (P/E) Ratio testing, Price/Graham Price Ratio testing or dividend yield testing.

The company still has Revenue even if it is declining still. The 10 year median P/S Ratio is 0.66. The current P/S Ratio is 0.02. This is based on Revenue of $231.4M for the last 12 months, Revenue per Share of $8.82 over the past 12 months and a stock price or $0.19. This ratio is very low. It is also some 96% lower than the 10 year P/S Ratio. This stock price testing suggests that the stock price is relatively cheap.

When dealing with small companies with no earnings, a P/S Ratio of 1.00 or below is good. However, with this company the revenue is declining. The decline is not as sharp as the book value, but it is still declining. The Revenue per Share has declined by 9.3% and 3.7% per year over the past 5 and 10 years.

The only other test we can do for the Price/Book Value per Share Ratio. The 10 year median P/B Ratio is 1.37. The current P/B Ratio at 0.14 is some 90% lower. The current P/B Ratio is based on BVPS of $1.35 and a stock price of $0.19. This stock price testing suggests that the stock price is relatively cheap.

A P/B Ratio of 1.50 is considered low. So this company's P/B Ratio is very low. However, the BVPS is still going south. The BVPS has been declining at 21% and 7.4% per year over the past 5 and 10 years.

As far as I can see no analysts is currently covering this stock. The company is in deep problems and analysts have stopped following it.

There is a report via Market Wired on Stock House about this company's second quarterly report for 2016. This CBC report in the early part of 2016 talks about this company closing some 14 stores this year with more closures to come and the company concentrating more on online sales. Vanessa Lu in the Hamilton Spectator talks about what Herschel Segal is doing to help Le Chateau survive in today's retail world.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see that report here.

The last stock I wrote about was about was Granite REIT (TSX-GRT.UN, NYSE-GRP.U)... learn more . The next stock I will write about will be K-Bro Linen Inc. (TSX-KBL, OTC-KBRLF)... learn more on Friday, October 7, 2016 around 5 pm. Tomorrow on my other blog I will write about Money Show 2016 - Rob Carrick... learn more on Tuesday, October 4, 2016 around 5 pm..

Le Chateau is a Canadian specialty retailer and manufacturer of contemporary fashion apparel, accessories, and footwear at value pricing for style-conscious women and men of all ages. The Company has retail locations in Canada and in the Middle East. Le Chateau's web-based marketing is further broadening the Company's customer base among internet shoppers in both Canada and the United States. Its web site is here Le Chateau Inc.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.