From:

Jonathan Poland
February 11, 2010
10:38 a.m. EST

Investor Briefing:

Conn’s Inc. (CONN)

Today’s Price: $4.50

52 Week Range: $4.42 - $17.67
Ave. Volume: 184,000

Conn’s Inc. is a specialty retailer of home appliances and consumer

electronics. They’ve been around since 1890, which means they’ve survived
through the last Great Depression. Does this mean the principles have endured
that helped them do so? I think they have.

Last year Conn’s sales rose from $824 million to over $890 million and they
squeaked out a profit of $25.69 million. This bodes well for investors that
want to get involved in the stock based on their Net Current Asset Valuation,
which is also very appealing.

Looking at their last quarterly balance statement, the company’s Total

Current Assets totaled over $420 million while Conn’s Total Liabilities are
just shy of $232 million. Compared to a market value of $102 million, Conn’s
$188 million NCAV gives the company a potential up-side of 85%.

NCA Value = $188 Million

Market Value = $102 Million

Commentary

The electronics business has changed dramatically with the exit of Circuit
City paving the way for Best Buy to become the largest and the strongest
business in the industry. Even they have to worry about online retailers,
Wal-Mart, Target, etc. However, Conn’s has survived this long for a reason;
it’s stayed small and profitable.

Plus, they have such a high Margin of Safety that even if they cannot keep up
their good track record of profits, they will be able to sustain their
business for years to come. And, priced be-low $5 is not a bad place to own
them.

Financial Highlights

Sales $890.75 MM
Profit: $25.68 MM (Net)
Current Assets $420.40 MM
Total Liabilities $231.95 MM
Market Cap: $102 MM

Analysis

While CONN does not have as much cash as I like to see in Net Current Asset
situations, the stock’s value to NCA presents a margin of safety that is too
good to pass up. Many analysts will not like this one because of the industry
they are in, but they will be overlooking the company’s balance sheet. As
long as Conn’s keeps their debt levels manageable, the company’s stock should
be worth owning.

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