Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, apparel brands licensor Cherokee (Nasdaq: CHKE ) has earned a respected four-star ranking.
With that in mind, let's take a closer look at Cherokee's business and see what CAPS investors are saying about the stock right now.
Cherokee facts
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Headquarters (Founded)
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Van Nuys, Calif. (1988)
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Market Cap
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$165.65 million
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Industry
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Apparel, accessories, and luxury goods
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Trailing-12-Month Revenue
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$31.9 million
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Management
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CEO Henry Stupp (since August 2010)
CFO Russell Riopelle (since February 2004)
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Return on Equity (Average, Past 3 Years)
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52.3%
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Cash/Debt
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$7.37 million / $0
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Dividend Yield
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8.2%
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Competitors
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Gap (NYSE: GPS )
Nike (NYSE: NKE )
V.F. Corp. (NYSE: VFC )
Quiksilver (NYSE: ZQK )
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Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 96% of the 554 members who have rated Cherokee believe the stock will outperform the S&P 500 going forward. These bulls include bammerone and All-Star MagicDiligence, who is ranked in the top 15% of our community.
Less than two months ago, bammerone brought Cherokee's solid fundamentals to CAPS' attention: "I love this company. No debt, great dividend, great revenue per employee, and they license low to mid tier brands at Target (NYSE: TGT ) which caters to both cheap-chic and quality value shoppers. All they do is spin off money."
In fact, retail giant Target is easily Cherokee's largest partner, representing more than 40% of its sales. While that kind of heavy customer concentration is certainly a risk, our community remains attracted to Cherokee's capital-light, cash-generating business model. Although Cherokee's top and bottom lines have declined steadily over the past few years, its whopping three-year average cash king margin (31%) easily tops that of rivals Gap (9%), Nike (9.9%), V.F. (9.7%), and Quiksilver (2.4%).
CAPS All-Star MagicDiligence explains just how Cherokee pulls it off:
The company does no product design, no production sourcing, and no marketing -- this is left to the licensees. In effect, Cherokee replaces private label brands for these licensees. This is what's known as a "light" business model, requiring next to no capital investment and little expenses save for paying the few employees and maintaining the brand trademarks in various countries. Every dollar invested into capital spending returns several hundred percent in earnings (return on tangible capital).
What do you think about Cherokee, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!
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