Stephan Co

Buy Price
Holding Type
Investment Theme
Trade Date
May 17, 2016

Stephan Co (SPCO)… (May 17, 2016)

I purchased this stock at $1.14/share. What is the scoop?

Primary business is a distributor of beauty products (think: Sally Beauty [SBH]). Company experienced severe declines for a long-period and after ousting CEO in early 2015, decided to divest its manufacturing business to become a pure-play distributor.

After strategic review ended in July 2015, company was left with run-rate free cash flow of $0.20/share (ex-corporate overhead), $0.15/share in excess cash, $0.25/share in real estate up for sale, NOLs of $18m, and a $0.15/share annual dividend (13% yield). This is extremely cheap.

Fast forward to 1Q16 and fundamentals have begun to turn. Revenue is still in decline but EBITDA/margins starting to improve.

UPDATE: Sold 10% of my position (1,000 shares) on 2/20/18 @ $2.70 per share (263% total return with dividends). This is becoming a large holding given the appreciation. My sale was to bring the position size down to an appropriate level and in light of valuation moving higher (~13.5x earnings of $0.20/share)… Though it is still cheap.

Sold some additional shares… 500 shares at $1.90 on 12/27/19, 1100 shares at $2 on 1/29/20, and 900 shares at $1.75 on 2/25/20.