It always seems darkest before the dawn. It's been dark and bleak at Blyth for over a year. Sales have dropped like a stone - revenue growth is down over 20% and earnings growth is down over 50%. The street likes companies that are growing, not companies that are shrinking.
In 2012 Blyth had revenues over $1.1 billion, in 2013 just over $800 million. What does 2014 have in store? That is the question for shareholders and one not easily answered. However I think the recent reaction to Blyth's earnings report provided a clue into where the stock could be headed over the short to medium term.
When $BTH Blyth, Inc. reported earnings this month the stock had every reason to decline, yet it rallied instead. Headlines stated $BTH Blyth, Inc. stock rose "despite missing estimates". What does that tell me? The bleeding has stopped for $BTH. Another sign is the double bottom for $BTH earlier this year just under $9 a share as the chart below shows.
The company also announced a dividend for the year. While not big dividend, the fact that the company approved a dividend shows the company is strong despite the sell off in 2013.
I have harped upon the massive short interest in the stock. And while it may prove to be a factor in 2014 as $BTH rises in price, I think earnings and growth will be what drives the stock this year and beyond. The 55%+ shorts may want to revisit their investment thesis in the name this year, however the price of the stock may dictate it for them.
$BTH remains a long term turn around trade and by the time the turn around is in 3rd gear this will be a $20+ stock. Money isn't made in this market buying at the top - just ask the herd that was buying $FB at $71 a share.
Money is made buying stocks no one likes. Stocks that are mispriced because the market does not understand them. $BTH is one of those stocks. The company reported over $800 million in revenue last year and over $55 in revenue for each share outstanding. They have a solid financial foundation and insiders who believe, based on last years buyout rejection, that the stock is worth well over $16 a share. Yet here we are at just over $10 a share. A move back to that buyout offer from late last year represents a 60% move from current levels.
I own and will be a buyer of calls for $BTH in 2014 in anticipation of a solid move to the upside. As the stock continues to recover from its 2013 collapse, I think a move to $13 in April is in the cards and the stock has a good chance at reaching over $20 a share before the end of 2014. The bleeding is over. The stock, in my view, has bottomed. And in 2014 we could witness a resurgence for $BTH.