Great research on MGPI. I read your valuation argument re tangible book value...you clearly believe fundamental deterioration will accelerate; do you believe we will get into a distressed situation that forces the street to look at tangible book value as a valuation basis, vs EBITDA, EPS, etc.? As in EBITDA goes away and this becomes an unprofitable company? It doesn't look like a highly leveraged balance sheet today and maintenance capex doesn't look burdensome at first glance, although I guess that could change if the bottom falls out of operating cash flow?
The reason I am using MGPI's tangible book value is that TBV is very roughly where the company traded in the early 2010s, before the start of the whiskey industry supercycle. So, TBV serves as a rough proxy for a price target that we might see in a full-cycle reversal. In this scenario, as you mentioned, we could see a significant decline in EBITDA, particularly if the industry inflection begins to significantly affect the Branded Spirits business.
Great research on MGPI. I read your valuation argument re tangible book value...you clearly believe fundamental deterioration will accelerate; do you believe we will get into a distressed situation that forces the street to look at tangible book value as a valuation basis, vs EBITDA, EPS, etc.? As in EBITDA goes away and this becomes an unprofitable company? It doesn't look like a highly leveraged balance sheet today and maintenance capex doesn't look burdensome at first glance, although I guess that could change if the bottom falls out of operating cash flow?
The reason I am using MGPI's tangible book value is that TBV is very roughly where the company traded in the early 2010s, before the start of the whiskey industry supercycle. So, TBV serves as a rough proxy for a price target that we might see in a full-cycle reversal. In this scenario, as you mentioned, we could see a significant decline in EBITDA, particularly if the industry inflection begins to significantly affect the Branded Spirits business.
Thanks. If the big players chase volumes with discounts in a market decline, seems like MGPI's smaller craft brand customers really vulnerable.