We came across a bullish thesis on Tandy Leather Factory, Inc. (TLF) on Buggy Whip Bargains’ Substack by Buggy Whip Bargains. In this article, we will summarize the bulls’ thesis on TLF. Tandy Leather Factory, Inc. (TLF)’s share was trading at $4.33 as of Oct 28th. TLF’s trailing P/E was 11.39 according to Yahoo Finance.
A skilled worker cutting and stitching leather for the company’s high-end furnishings and fixtures.
TLF is on the verge of a strategic real estate transaction, potentially involving the sale of its headquarters, distribution center, and flagship store in Fort Worth, TX, spanning approximately 21,000 square meters. In December 2023, the company engaged a broker to identify buyers for this prime property, which includes significant assets with a current estimated value of $11 million. This valuation encompasses land and buildings, which TLF originally acquired for over $4.5 million in 2007, followed by approximately $2.5 million in renovations. Over the years, additional improvements have been made, with the acquisition cost for the land and buildings estimated to be around $10.7 million as of 2023, including a $1.2 million roof replacement investment in Q1 2024.
The land, valued at $1.5 million, remains non-depreciated, while the buildings depreciate over a 40-year period at a rate of 2.5%, bringing their estimated book value down to approximately $8–9 million when accounting for investments made in the recent quarter. The Fort Worth area has seen substantial economic growth since TLF’s acquisition of the property, likely increasing demand for industrial and logistics spaces. The broker is reportedly seeking $25 million for the property, translating to about $1,196 per square meter. Comparative research suggests similar properties in the region are selling for between $1,100 and $1,700 per square meter, making TLF’s asking price appear competitive.
Modeling various sale scenarios reveals significant implications for TLF’s enterprise value (EV), currently valued at $26 million. For example, selling the property at $900 per square meter would reduce the EV by $18.8 million to approximately $7.2 million. If the sale price exceeds $1,240 per square meter, the pro forma EV would shift to negative territory, suggesting that favorable pricing could dramatically impact market perceptions of TLF’s value. Regardless of the sale outcome, TLF’s operational fundamentals remain strong, with 2023 revenues of around $76 million and an operating profit of $4.4 million, slightly below its historical average margins. Should the property be sold at a competitive price, it could catalyze a reevaluation of TLF’s enterprise value-to-EBIT ratio, prompting the market to reconsider the valuation of this profitable market leader.
Tandy Leather Factory, Inc. (TLF) is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 1 hedge fund portfolios held TLF at the end of the second quarter which was 1 in the previous quarter. While we acknowledge the risk and potential of TLF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TLF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.