Circuit City Buyout?

With speculation that CDW (CDWC) could be taken private I created a comparable analysis of Circuit City (CC), Best Buy (BBY), and CDW (CDWC). CDW is not directly comparable since they are less consumer focused than Best Buy and Circuit City.


CC, BBY, CDWC
P/Sales 0.22, 0.62, 0.85
P/Book 1.50, 3.62, 4.08
EV/EBITDA 5.68, 7.22, 11.01

Circuit City does have a tough road to recovery ahead but its valuation should make it an attractive LBO candidate. CC has over $4.00 in cash per share and a negligible amount of debt outstanding. Unprofitable stores could be sold off to reduce the debt issued to take the company private. CC has eliminated many of their high paid vice presidents and hourly workers to cut costs. Although this could have a negative effect on sales, it shows initiative by management to make changes and improve the company even if CC fails to get a bid from private equity.

"We view CC as one of the best risk/reward opportunities in our space."-Pacific Crest Securities (5/3/2007) (Outperform)


Note: I have no position in CC