Escalade (ESCA) Goes Below Tangible Bool Value

Book value is shareholder equity or in a case of a company that does not have preferred shares this is assets less liabilities. Tangible book value is book value less goodwill and other intangible assets. In other words, tangible book value is what the company is worth if it its tangible or real assets are sold. Companies that trade below tangible book values are difficult to find. A company I have talked about back in April and June of this year is currently trading below its tangible book value.

Escalade (ESCA) is based in Indiana and has two segments – sporting goods and office services and products. Today Escalade reported earnings for the second fiscal quarter which were $0.12 per share and the stock closed at $5.07 under its tangible book value per share of $5.17.

Revenues for the first half of 2011 were up 15% compared to the same period in 2010 for the sporting goods and revenues for the printing business were up 5.4%. The company expects even stronger sales for the rest of the year and I am raising my Escalade 2011 earnings estimate from $0.50 to $0.55 per share.

I still see problems (too small, too much competition) with Escalade office service/supply business and think the company should divest it but at $5.07 a share Escalade is trading under 10 times forward looking P/E and under its tangible book value. Also, ESCA pays currently a $0.10 annual dividend for a 2% yield. The problem of course is that Escalade is a very small cap stock and it has a low trading volume (about 5,000 daily) but in this turbulent market it should not be a problem for a small investor to “steal” a few thousand shares.


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