Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Briggs & Stratton was the thirteenth company mentioned in this post: , which makes it next up for review.

Briggs & Stratton is best known as a small gas engine manufacturer, though some of the tools it makes are battery powered. The business is going through tough times right now, partially because of a shift from gas to battery power in small outdoor equipment, partially due to the Sears collapse, and partially because the company itself bungled operations during its ERP conversion ( ). The company is restructuring, and the big question is what happens next.

Dividend: Briggs & Stratton suspended its dividend early this year as it goes through its restructuring and to protect its balance sheet. A prudent move for the company, but a bad signal to send to shareholders. Based on its dividend, I would not be buying Briggs & Stratton's shares right now, but the shares have already dropped post-cut, so it'd be a bit like closing the barn door after the animals have escaped at this point.

Balance Sheet: Briggs & Stratton has a debt to equity ratio just below 1.9 and a current ratio just above 1.6, with around $42 million in cash and equivalents on hand. This gives the company some room to navigate through its restructuring. Based on its balance sheet, I'd be willing to consider holding on to the shares I currently own.

Valuation: Briggs & Stratton has been burning cash and is expected to continue to lose money in 2020. Analysts do expect it to return to profitability in 2021, with an average estimate of $0.40 per share in earnings then. At a recent price of $2.84 per share, it's priced at around seven times those estimated earnings, which would make today's price a reasonable one to pay if the company works its way through its restructuring successfully. As usual, that "if" is a very big two-letter word. Based on its valuation, I'm ambivalent about holding on to the shares I currently own.

Next Steps: I hope to continue to roll my covered calls to try to generate a little bit of cash, though at current prices, I'd likely have to roll down and out to get any sort of premium from those calls. I won't cry if this one gets called away, nor will I be shocked if its restructuring isn't as successful as currently hoped.

Discovery/HR Home Fool
Disclosure: I own shares of Briggs & Stratton and have sold April 2020 $7.50 calls against those shares.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.