McRae Industries, Inc. manufactures and sells military combat boots for the United States Army. The company also imports and sells western and work boots. It offers its products for men, women, and children under the Dan Post, Laredo Western Boots, Dingo, McRae Industrial, and McRae Footwear brand names. McRae Industries, Inc. was founded in 1959 and is headquartered in Mount Gilead, North Carolina.

McRae Industries, Inc.

Consumer Cyclical

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are somewhat mixed. In the past 12 months, the dividend yield has been good and slightly above its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream. 

MCRAA reported revenue of USD 122mn in the last 12 months, down 2% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 59% from FY23 to USD 5.66.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 2ppts over six months and grown 12ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 10.7% in the last 12 months, up from 9.6% in FY23. 

Historically, MCRAA has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 9.0%, a growth from 7.0% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 10.9%, above the peers. 

McRae Industries, Inc. reported a return on equity (RoE) of 11.1% in the last 12 months, down from 11.6% in FY24. 

Another important profitability metric, return on assets (RoA), amounted to 10.2% in the last 12 months, a decrease from 10.6% in FY24. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.8 in the past several years. This ratio implies a strong shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

MCRAA has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity may be unstable and becomes extremely unfavourable on the days with the lowest activity. However, under highly turbulent market conditions, the trading volume tends to improve significantly. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a very small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note strong debt servicing capacity, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to slow historical revenue growth, poor working capital management.

In highly turbulent market conditions, MCRAA is moderately volatile. In other words, the stock will fall more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be moderate. 

In normal market circumstances, MCRAA is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. 

Considering past and projected metrics, the stock is slightly 'cheaper' than its peers. In particular, the stock is underpriced on P/E, 'cheap' on EV/EBITD. 

McRae Industries, Inc.

$ 46.5

4

McRae Industries, Inc.

$ 46.5

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 46.5

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