Numbers Check on Sears Holdings - It's Cheap

With its market price declining daily, giving me the opportunity to pick up even more shares, I thought I’d present a very rough look at how the market is valuing Sears Holdings (SHLD) right now, putting reasonable numbers to a rather abstract investment idea.

Reality check number 1: In normal times, Sears is generating a good $50 billion in sales.  $50B.  The current market value hovers around $10B, or one fifth of sales.  Add in net debt ($2.7B in LT debt and capital lease obligations plus a $1.1B pension shortfall) and subtract cash ($1.4B), enterprise value goes up to about $12.5B. Is Sears worth a quarter of its annual sales?  Well, that depends on profit margins, which had been improving until late last year and into this one.   Right now, margins stink.  EBITDA margin came screeching down to 4.4% last quarter, which is awful.  Eddie has said in the past that