Market Capitalization $507.9 Million

Transcription

1 BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate $ BUY SDAQ: WI BUY RATING SINCE 11/30/2010 TARGET PRICE $ WI BUSINESS DESCRIPTION Winmark Corporation operates as a franchisor of 5 retail store concepts that buy, sell, trade, and consign merchandise primarily in the United States and Canada. The company operates through two segments, Franchising and Leasing. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues Net Income EPS Sector: Consumer Goods & Svcs Sub-Industry: Specialty Stores Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY TARGET PRICE $ RETURN ON EQUITY (%) WI Ind Avg S&P 500 Q Q Q P/E COMPARISON Volume in Thousands COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History RECOMMENDATION We rate (WI) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income WI Ind Avg S&P 500 HIGHLIGHTS WI's revenue growth trails the industry average of 28.6%. Since the same quarter one year prior, revenues slightly increased by 5.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. EPS ALYSIS¹ ($) The gross profit margin for is currently very high, coming in at 91.84%. Regardless of WI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WI's net profit margin of 32.55% significantly outperformed against the industry. Q Q Q Q Q Q Q = not available NM = not meaningful Q Q Q Q Compustat fiscal year convention is used for all fundamental data items. 's earnings per share declined by 5.7% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, WINMARK CORP increased its bottom line by earning $5.13 versus $4.71 in the prior year. Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels. The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has decreased by 6.2% when compared to the same quarter one year ago, dropping from $6.09 million to $5.72 million. PAGE 1

2 $ SDAQ: WI PEER GROUP ALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -8% 12% BNED PRTY DKS UNFAVORABLE HIBB SIG GNC -10% BKS ODP EBITDA Margin (TTM) SBH FAVORABLE WI 60% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $281 Million and $3.2 Billion. Companies with or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -8% 12% UNFAVORABLE GNC -100% Earnings Yield (TTM) BNED FAVORABLE WI PRTY SBH HIBB HZO DKS SIG ODP BKS 20% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -7.3% and 11.7%. Companies with or NM values do not appear. INDUSTRY ALYSIS The specialty retail industry includes very well-known home improvement, apparel, automotive, and other narrow-focus stores such as Home Depot (HD), TJX Companies (TJX), Lowe s Companies (LOW), Gap (GPS), Bed Bath & Beyond (BBBY), Ross Stores (ROST), O Reilly Automotive (ORLY), CarMax (KMX), and Build-A-Bear Workshop (BBW). The variety of product focuses targeted by specialty retail companies is very diverse. These include but are not limited to home improvement goods, pharmaceutical & beauty, shoes, electronics, and office supplies. Also included are stores narrowly focused on music, books, wine, games, rentals, vitamins, lumber, sporting goods, toys, jewelry, and fashion apparel for men, women, and teddy bears. Some of the larger specialty retail companies also profit from the extension of credit to their customers with branded credit cards. Companies in this industry are judged based on the metric of same-store sales, a measurement that shows if stores open for more than one year are increasing top line revenue or shrinking. PEER GROUP: Specialty Retail Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) WI HZO MARINEMAX INC , BKS BARNES & NOBLE INC , HIBB HIBBETT SPORTS INC GNC GNC HOLDINGS INC NM 2, SIG SIGNET JEWELERS LTD , , BNED BARNES & NOBLE EDUCATION INC NM 1, DKS DICKS SPORTING GOODS INC , , SBH SALLY BEAUTY HOLDINGS INC , , ODP OFFICE DEPOT INC , , PRTY PARTY CITY HOLDCO INC , , The peer group comparison is based on Major Specialty Stores companies of comparable size. PAGE 2

3 SDAQ: WI Annual Dividend Rate $ COMPANY DESCRIPTION Winmark Corporation operates as a franchisor of 5 retail store concepts that buy, sell, trade, and consign merchandise primarily in the United States and Canada. The company operates through two segments, Franchising and Leasing. Its franchises retail stores operate under the Plato's Closet, Once Upon A Child, Play It Again Sports, Music Go Round, and Style Encore brand names. The company's Plato's Closet brand stores buy and sell used clothing and accessories for the teenage and young adult market; and Once Upon A Child brand stores buy and sell used and new children's clothing, toys, furniture, equipment, and accessories primarily targeting parents of children ages infant to 12 years. Its Play It Again Sports brand stores buy, sell, trade, and consign used and new sporting goods, equipment, and accessories for various athletic activities, such as team sports, fitness, ski/snowboard, golf, and others; Music Go Round brand stores buy, sell, trade, and consign used and new musical instruments, speakers, amplifiers, music-related electronics, and related accessories; and Style Encore brand stores buy and sell used women's apparel, shoes, and accessories. In addition, the company is also involved in middle-market equipment leasing business focusing on technology-based assets for large and medium-sized businesses; and small-ticket financing business. As of December 31, 2016, it had 1,186 franchised stores. Winmark Corporation was founded in 1988 and is headquartered in Minneapolis, Minnesota. 605 Highway 169 North, Suite 400 Minneapolis, MN USA Phone: Fax: STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of WI shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 5.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, WI has a growth score better than 90% of the stocks we rate. Total Return 3.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 60% of the companies we cover. Efficiency 5.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. Price volatility 4.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 80% of the stocks we monitor. Solvency 1.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 10% of the companies we analyze. Income 3.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 50% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3

4 $ SDAQ: WI Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial INCOME STATEMENT Net Sales ($mil) EBITDA ($mil) EBIT ($mil) Net Income ($mil) FINCIAL ALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. Even though sales increased, the net income has decreased. is extremely liquid. Currently, the Quick Ratio is 2.25 which clearly shows the ability to cover any short-term cash needs. The company's liquidity has decreased from the same period last year, indicating deteriorating cash flow. At the same time, stockholders' equity ("net worth") has significantly decreased by % from the same quarter last year. Overall, the key liquidity measurements indicate that the company is very unlikely to face financial difficulties in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit BALANCE SHEET Cash & Equiv. ($mil) Total Assets ($mil) Total Debt ($mil) Equity ($mil) PROFITABILITY Gross Profit Margin 91.84% 93.78% EBITDA Margin 56.57% 62.99% Operating Margin 56.08% 62.38% Sales Turnover Return on Assets 48.91% 49.90% Return on Equity DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) 4 4 Div / share EPS Book value / share Institutional Own % Avg Daily Volume 6,297 8,218 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4

5 $ SDAQ: WI RATINGS HISTORY Our rating for has not changed since 6/26/2009. As of 11/30/2017, the stock was trading at a price of which is 4.4% below its 52-week high of $ and 20.9% above its 52-week low of $ Year Chart BUY: $ $140 $120 $100 MOST RECENT RATINGS CHANGES Date Price Action From To 11/30/15 $95.50 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/30/2017) 44.19% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months % Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss % Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY Research Contact: Sales Contact: VALUATION BUY. The current P/E ratio indicates a premium compared to an average of for the Specialty Retail industry and a value on par with the S&P 500 average of Normally, for additional comaprison, we would look at the price-to-book ratio; however, this company's price-to-book ratio is negative making the value useless for comparisons. The price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium. Upon assessment of these and other key valuation criteria, seems to be trading at a premium to investment alternatives within the industry. Price/Earnings WI Peers Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations. WI is trading at a premium to its peers. Price/Projected Earnings WI Peers Neutral. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth potential. Ratio not available. Price/Book WI NM Peers Neutral. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. WI's P/B is negative making this valuation measure meaningless. Price/Sales WI 7.33 Peers 1.58 Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. WI is trading at a significant premium to its industry. DISCLAIMER: Price/CashFlow WI Peers Premium. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. WI is trading at a significant premium to its peers. Price to Earnings/Growth WI Peers 2.60 Neutral. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. Ratio not available. Earnings Growth lower higher WI 4.37 Peers 9.17 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, WI is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher WI 4.75 Peers 5.16 Average. Comparing a company's sales growth to its industry helps to determine if the company is adding or losing market share. WI is keeping pace with its peers on the basis of sales growth. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at PAGE 5