NORTH PLAINS, Ore. - Shareholder Parthenon LLC is urging the board of Jewett-Cameron Trading Company Ltd. (NASDAQ: JCTCF) to consider strategic alternatives, including a potential sale, to enhance shareholder value. This call to action follows a period of declining stock performance and profitability for the company.
Parthenon LLC, which owns approximately 6.2% of Jewett-Cameron, expressed its concerns in an open letter to the board, highlighting the company's poor financial results over the past five years. The shareholder noted that Jewett-Cameron's stock has significantly underperformed compared to the Russell 2000 Index, with a negative return of 46.3% over five years, while the index gained 62.4%.
The letter also pointed to a substantial drop in the company's EBITDA, from an average of $4 million annually in the ten fiscal years ending August 2021, to less than $1 million in FY 2023. The first nine months of the current fiscal year have seen EBITDA fall to around negative $1.2 million.
Parthenon LLC criticized the lack of insider ownership, which stands at less than 1%, and the absence of stock purchases by insiders over the past decade. This lack of investment is seen as a vote of "no confidence" in the company's prospects.
The shareholder's letter suggested that Jewett-Cameron's branded products and company-owned real estate might be more valuable as part of a larger organization with more resources. Parthenon LLC is advocating for the board to engage an external advisor to explore potential strategic alternatives.
The letter also mentioned the company's recent difficulties in securing a credit line, resulting in a new agreement with an interest rate of prime plus 4.75%, which Parthenon LLC views as an indicator of the company's challenges.
This push for strategic review comes after Jewett-Cameron's management faced criticism for attempting to introduce a staggered board structure, a move that was ultimately rejected by shareholders.
The information in this article is based on a press release statement from Parthenon LLC.
InvestingPro Insights
As Jewett-Cameron Trading Company Ltd. (NASDAQ: JCTCF) navigates the challenges outlined by Parthenon LLC, the latest data from InvestingPro provides additional context on the company's financial health and market performance. The company's market capitalization stands at a modest $15.61 million, reflecting the scale of its operations and its positioning in the market.
One notable highlight from the InvestingPro Tips is that Jewett-Cameron holds more cash than debt on its balance sheet, which could be a potential point of strength in discussions of strategic alternatives. This liquidity position is further underscored by the fact that the company's liquid assets exceed its short-term obligations, suggesting a level of financial flexibility in the near term.
From a valuation standpoint, Jewett-Cameron's P/E ratio as of the last twelve months is 12.99, which may appear reasonable in the context of its industry. However, adjusted metrics for the same period reflect a negative P/E ratio of -21.62, indicating expectations of reduced profitability. This is further supported by a negative revenue growth of -11.18% over the last twelve months, which may have contributed to the shareholder's concerns regarding the company's performance.
InvestingPro offers a wealth of additional tips for investors considering Jewett-Cameron's stock, with a total of 5 tips available that provide deeper insights into the company's financial metrics and market position. For those interested in exploring these tips, they can be found at https://www.investing.com/pro/JCTCF.
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