A 173 Year Old Powerhouse That's Positioned for a Comeback
An 1852 Icon with Lots of Potential
There’s a company headquartered in the heart of Tennessee that many investors might be overlooking right now. Its stock is down more than 45% over the past year. Earnings have slumped, demand has softened, and raw material costs have surged thanks to inflation and an aggressive tariff policy. At first glance, this company might look like just another casualty of a cyclical downturn.
You probably already know this brand. You might know them from a gritty movie hero in the 70s or from the iconic look of old school Western Americana. The things this company produces have deep roots in both U.S. history and culture. In today’s modern age this company can be extremely politically divisive but they’ve been around since 1852 and have carved out an important place in the American landscape.
Like many businesses, it’s been caught in a squeeze. Falling demand, rising interest rates, steel tariffs, and cautious consumer spending have all weighed on recent performance. Yet despite the headwinds, this company has remained profitable, paid out over $23 million in dividends, and aggressively repurchased its own shares at depressed prices. The company’s current dividend yield is north of 6% and management says that they’re committed to rewarding long term shareholders by using cash flow to continue to pay out dividends and to buy back stock while they navigate this industry wide downturn.
During this down turn, the industry that this company operates in has been shrinking. Smaller players are exiting the business and this company has been scooping up market share. A major competitor is dealing with damaging allegations and product issues. Meanwhile this company is ramping up operations in a new, highly efficient manufacturing facility built with the support of state grants and local tax incentives.
Even under a scenario of continued sales declines, a discounted cash flow projection shows that this stock is still undervalued. In a more optimistic recovery case the stock should more than double. The thesis here is pretty simple. A legacy brand with a solid balance sheet has been investing in leaner operations and has a surprising number of catalysts lined up over the next couple of years.