About Yeti
One day my dad was in town and being the sports enthusiasts we are, we drove out to one of Austin’s football (it’s called soccer in the United States guys, get a grip) clubs’ stadiums to not attend a match, but to simply check out some of the merchandise within the team’s main fan shop, looking to peruse and hopefully leave with a piece or two so as to commemorate his visit.
After pulling up to the stadium while driving slowly and intentionally on the gravel pecking at the car’s tires on the entryway, we strolled right in and looked to see if we could find any cool shirts, shorts or other team memorabilia that didn’t cost an arm, a leg and the entire rest of the human body.
We looked, we kept looking and while I’d usually say “close but no cigar,” I’d be doing our readers a gross disservice, as none of the pieces of merchandise were even close to being reasonably priced.
One item caught my eye and to my best recollection it was a sort of mini-thermos with the team’s colors branded all around the tiny cylinder.
I initially thought it might be somewhere in the neighborhood of $25.
Suffice it to say it seems as though my future career on The Price is Right is over well before it even got started.
I kid you not, this thing was around $65.
I was absolutely astonished and at the same time flabbergasted with a hint of disgust and a pinch of distress.
Apparently someone was and is willing to buy it at that price, however, it certainly wasn’t and still isn’t me.
However, if it works, it works and one thing Yeti is quite well known for is its ability through its variety of products to keep one’s beverages and drinks ice cold, which possibly accounts for the elevated price of the mini-thermos.
Also, it’s far from a secret that items branded with a sports team’s logo or their likeness tend to be marked up to obscene rates because, hey, it’s Austin FC, it’s totally worth paying $30 extra, right?
So, so wrong.
No offense to Austin FC, but I just can’t look myself in the mirror if I dropped nearly $70 on something that can nearly fit in the palm of my hand that is designed to contain the contents of my beverage.
Regardless of our experience with one of Yeti’s products, it doesn’t really seem to matter all that much since the masses are willing to pay for the company’s products, and Yeti has a lot of products it sells, all apparently centered around keeping one’s beverages cool and cool looking.
Taking an initial gander at its product lines, while the company has a large focus in the beverage container space, it also has some footing in other spaces such as traveling gear like backpacks and other sorts of bags and even accessories for one’s canine compadre.
With all of this being the case, Yeti has a very strong brand and likely has some strong margins given the mark-ups we’ve seen, at least, so without further ado let’s get into this company’s core financials in hopes of figuring out whether or not this company’s stock (NYSE: YETI) is worth considering as an investment for the months, years and decades to come.
Yeti’s stock financials
With a current share price of $40.85, a market capitalization of $3.54 billion, a price-to-earnings (P/E) ratio of 47.72 and no annually distributed dividend offered to its shareholders at the moment, Yeti’s stock seems to be quite overvalued given that its current price-to-earnings ratio exceeds the commonly held fair value P/E benchmark of 20, however, if there is some strong revenue growth flowing through this company’s veins, it might be absolutely worth paying a bit of a premium for (maybe not more than double the standard benchmark, but we shall see).
But first, with respect to the company’s balance sheet, Yeti’s executive team is in charge of stewarding just north of $1 billion in terms of total assets as well as $550 million in terms of total liabilities, which certainly puts a smile on our faces given that this company is well capitalized and seemingly prepared (generally speaking) for the deepening of the current recession, as its total assets outweigh the amount of its total liabilities by an encouraging amount.
This can be somewhat rare in a company that focuses much of its operations in retail, however, Yeti has seemingly pulled it off, perhaps one of the reasons being that it is a specialty retailer and maybe it is shifting more of its operations and sales online, allowing it to reduce some of its costs and other overhead and expenses.
Nevertheless, as it relates to Yeti’s income statement, the company’s total annual revenues since 2018 have been growing, however, from our vantage point not quickly enough to justify paying over forty times earnings for a piece of this company’s ownership pie.
For instance, the company’s total annual revenue in 2018 stood at $779 million, rising to $914 million the next year, a little more than $1 billion in 2020, around $1.4 billion in 2021 leading all the way up to its latest reported figure of just under $1.6 billion, as reported in 2022.
We didn’t expect much softening in terms of sales during the onset of COVID-19 but we certainly didn’t expect the sort of growth it generated during this time period, however, it was definitely reasonable to expect that this company’s revenues would rise at the rate it did between 2020 and 2022 given the fact that more folks around the world were gearing up to get back out into reality as they knew it and maybe even pursue new adventures, of course, of which they couldn’t do without their grossly overpriced Yeti cup, cooler or canine bed.
All kidding aside, this is still really strong revenue growth from the company in question.
Thankfully, according to the figures displayed on the company’s cash flow statement, net income and total cash from operations generation hasn’t been much of an issue for Yeti, as on both of these fronts the company has been able to churn out positive figures, even during what has so far been the worst period of COVID-19.
Yeti’s stock fundamentals
So let’s get this straight with respect to the company’s profit margin, particularly its trailing twelve month (TTM) net profit margin.
According to the figures displayed on TD Ameritrade’s platform, Yeti’s TTM net profit margin isn’t as high as we had originally assumed, however, it is notably better than the industry’s listed average.
For example, its TTM net profit margin is pegged at 4.65% to the industry’s respective average 0.35%, which tells us a few different things.
For starters, we are happy to find that Yeti is a TTM net profit margin leader in its respective category as well as the fact that the company’s products are probably quite quality-filled, as some of its margin is likely sacrificed within its enhanced product quality, which, if this is the case we don’t mind at all.
After all, they are a leader in the space for a reason.
As it pertains to the company’s TTM returns on assets and investment(s), Yeti maintains a leadership position in these respects yet(i) again.
For instance, also according to the figures displayed on TD Ameritrade’s platform, Yeti’s TTM return on investment(s) stand at 11.51% to the industry’s listed average of 4.39%, which, obviously, is a considerable discrepancy favoring Yeti, indicating that its executives have acted as fine custodians of the company, its brand and its capital.
Should you buy Yeti stock?
I’d rather buy a couple of shares of the company’s stock than one single miniature thermos, that’s for sure.
However, buying at the right price and not overpaying for an asset is critical in one’s investment framework and overall decision making.
With that, we wouldn’t be very objective if we didn’t applaud this company for becoming the distinguished brand powerhouse that it has become today, its recent growth in total annual revenues, its comparably high TTM net profit margin, its impressive TTM returns on assets and investment(s) and its cash flows in recent years as well.
But it is important to note where price and value diverge and at this current juncture I am just not willing to pay a sizable premium for shares of this company’s stock (NYSE: YETI), however, if and/or when shares of the company’s stock come down to more attractive, favorable levels, you can assume our team will be taking a closer look at this company.
All things considered, we give Yeti’s stock a “hold” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.