Small-Cap Dividend Spotlight: Guess?

Despite improving operating performance, Guess? (GES) is still a stock I'm not interested in buying for the following reasons:
2018 was a rebound year and 2019 looks even better, but many of the core operation metrics still are concerning. This includes operating margin, free cash flow, and inventory turnover. Free cash flow has been weak for the last couple of years, which has made the dividend unaffordable at the current level of performance. This has led to a deterioration in its net cash position over the last couple of years. The stock is fundamentally overvalued based on a discounted cash flow model and a peer analysis. There's simply many other consumer retail stocks that have cheaper valuation multiples and better growth expectations. Guess? Financial Snapshot During 2018, revenue increased 7.9% to $2.36 billion (5.3% growth on a constant currency basis). Excluding the impact of non-ordinary expenses, net earnings also improved to $58.4 million, or $0.70 per share ($0.46 per share during 2017). With that being said, the company is still well off sales, margins, and profits recognized back in 2014. GES is battling declining performance in its American stores, which is its core market.

Data Source: GES SEC Filings Note - Fiscal year-end was February 3rd, 2018 I like the low amount of debt GES has, which gives the company some operating flexibility going forward. However, the deteriorating net cash position is concerning (driven by dividend payments and... Read more

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