N Brown – is it time to buy yet?

I first looked at N Brown (LSE:BWNG) in May 2017, when the share price was £2.68, and concluded that I would buy when the money came through from selling a property. While I was waiting the share shot up to over £3.50.  I decided not to buy.

Now that it has fallen back to £2.74 (market capitalisation £777m) I need to analyse again.  This analysis will be include new information from the half-year result to 2^nd September.

Earlier Newsletters (4^th – 12^th May 2017, 30^th June 2017) give more detailed background and qualitative analysis than I’m going to provide here – there is no point in repeating it all.

But I will draw key information from those Newsletters and update where I can.

The main emphasis will be on cyclically adjusted price earnings ratio and return on net tangible assets, leading to a new valuation.

Brief description of the company

N Brown is a collection of fashion brands.  It mostly sells online (72%), but still sells quite a lot using paper catalogues.

It has around a dozen specialised niches, with a reputation for serving larger people and older people.

Some of it brands are well-known, e.g. Simply Be is advertised on TV a lot at the moment, Tall & Mighty is well-known to larger men.  Others are more niche, e.g. Julipa for corsetry.

It sell over £600m of clothing and other merchandise per year, but also makes a significant amount of money from supplying finance to its 4 million regular customers – revenue in its finance division is over £260m.

Cyclically adjusted price earnings ratio, CAPE

By adding the earnings for the six months to 2^nd September (after doubling them) I have 11 years of earnings, which should represent a mixture of market circumstances.  By reflecting trading through the cycle, an average EPS will help us gauge a conservative estimate of likely future earnings.

Dividend yield is 14.23p/274p = 5.2%.  That is pretty attractive. I believe prospects of it being sustainable are good given the large amounts of free cash flow generated from operations.  Also note that through the last recession dividends grew.

I do not like the way the managers write off shareholders’ money that they have lost on say selling duff insurance policies (PPI) as “exceptional cost”.

Just because the losses cannot be

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