Monday, January 14, 2008

Next Idea- Long/Short on MW/JOSB

MW is 3x the size of JOSB, but both in the same business. Both have ebitda
margins of around 16%, but MW has been growing faster than JOSB. MW recently
warned on sales growth and their stock tanked. MW trades at .45x EV/sales, JOSB
trades at .76x sales. I think this is likely to converge, with most likely
outcome being that JOSB falls to MW (rather than MW rising significantly).
I'll map out the idea more fully this afternoon, but it looks pretty
interesting, given how obvious and straightforward the valuation disconnect
appears to be. The JOSB store I drive by every other day always seems to be

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