Friday, December 22, 2006

Colorado faces tougher times

A private equity takeover and the departure of its CEO in 2006 will downgrade profits for outdoor clothing retailer Colorado Group Limited. Decreased earnings before interest and tax (EBIT), in addition to costs associated with the September takeover by Affinity Equity Partners, an operations review and a payout for boss Mel Sutton, are expected to decrease profits to $A27m. Businessman Solomon Lew has prevented Affinity's complete takeover of the Australian company by purchasing a 10% stake.

Colorado Group Limited is at a good Price Earnings yield and dividend yield but the longer term outlook for the stock is not as rosy. Its PEG and P/B ratio are also not very good. Its also operating in a sector that is having a rough time and is out of cycle (retail sector). Its worth waiting to see if this share will go much lower especially with the bad news.

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