Five weeks ago I wrote up a debt-free American manufacturer trading in the high thirties and argued the reported quarter was an artificial trough, that a pile of one-time costs was hiding the real earnings power, and that a European strategic buyer sitting inside the register had put a hard price reference under the stock.
The quarter I said was coming has now arrived. Sales hit a six-quarter high. Gross margin expanded roughly 460 basis points year over year on a clean basis, once you strip out a write-off that makes the reported comparison useless. Adjusted EBITDA more than tripled. Sell-through to retailers grew at better than three times the rate of the underlying industry, which is share gain, not a rising tide.
The stock is down 1.9%.
So the enterprise value fell while the earnings rose, and the multiple did all the work the price refused to do. On annualized second-quarter EBITDA, this went from roughly 12x to roughly 7x in a single reporting cycle, with $7.35 per share of net cash, zero debt, and a strategic acquirer contractually obligated to launch a tender at a floor 18.5% above today’s print.
What changed and why didn’t the stock move? Let’s find out.
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