Sector financial performance:

This company, which is primarily a designer, marketer, and distributor of small household appliance and a retailer of kitchenware, has been grouped into household appliance sector in household equipment industry.

Demand for small household appliances seems to have been solid but fluctuated slightly between 2015 and 2017. Based on typical company’s data, changes in sales units have been in range of -1.5% and 1.5%. However, product mix’s shifting to higher price products in US consumer market, together with higher selling price in global commercial market and higher sales volume in global consumer markets, is the major driver behind the large growth in sales of some of typical companies in this sector in the first half year of 2018.

As a result of lower products costs, the typical companies’ gross margin has gone up to about 26% during the same period and the typical operating margin is at around 5% with a higher SG&A as percentage of sales of about 21% in 2018.

The typical average enterprise price/EBI ratio is: 18(interest/EBI ratio of 9%) and stock price/sales ratio is 0.5.

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Company performance:

It seems that the demand for products of this company in the past several years has been solid and relatively stable. However, we have seen a strong increase in sales since 2018 driven by rising average selling price in US consumer market and global commercial market.

The first six months of 2018 compared with 2017

Organic wholesale increased 7% (6% for 2Q) primarily due to increase in product mix in US consumer market and global commercial markets and sales volume in global consumers markets.

The 2017 compared with 2016

Organic wholesale increased 1.5% primarily due to increase in unit volume offset by decrease in price.

Comparable store sales of retail (kitchen ware) decreased 7.5%.

2016 compared with 2015

Organic wholesale decreased 1.3% due to decrease of 1.5% in unit volume offset by increase of

0.2% in price.

Comparable store sales of retail (kitchen ware) decreased 3%.

Its gross margin is at around 26% in 2018 up from about 25% of 2015 due to lower product costs and product mix’s shifting. The SG&A as percentage of sales has been up to about 21% in 2018 and thus left a flat operating margin of about 5% in 2018.

Stock price

This stock currently has a stock price/cash flow ratio of 18($25). We think that its stock is being relatively overvalued considering weak demand as indicated by the sale volume.