Leisure Stock Universe- Yeti Holdings, Inc. Sample report, July 2019.

1. 1
JULY 18, 2019
Cavalax Group
Authored by: Chelsea Stepchuk
YETI Holdings, INC.
July 2019

2. 2
YETI
Summer earnings season is getting hotter and this “cooler”
company is handling the heat.
On August 1st
, now slightly over nine months since the luxury leisure and outdoors
company had its IPO, YETI has announced it will release its Q2 2019 Quarterly Results.
The earnings release will be the company’s second quarterly earnings statement
provided since becoming a publicly held entity on October 25th
, 2018.
This report utilizes a mosaic of public, nonpublic, and nonmaterial information from
company financials, stock charts and third-party research to determine a target price
that makes sense for the company and its shareholders for the next year.
By using both aspects of fundamental and technical analysis to develop the above
hypothesis, I conclude YETI to be an accumulate at any price point at or below its
support level of $30.00. With characteristics of both a growth and value stock, strong
momentum and low volatility- I recommend YETI as a stock to buy before it breaks out
and establishes a higher support level. All opinions are my own and expressed as such.
As a newer company listed on the NYSE, investors will not only be analyzing YETI’s
earnings compared to a broader, established indexes such as the S&P 500 but also
compared to the slew of other recent, hot IPOs (Uber, Slack, Pinterest, Lyft, and Beyond
Meat.)
I believe Yeti shares are undervalued and show characteristics
of a value, growth and momentum stock.

3. 3
Table of Contents
Yeti Overview………………..4
Competitive Landscape………………..5
Key Performance Ratios……….………7
Valuation Analysis………………..11
Risks………………..12
Earnings Expectations………………..14

4. 4
Company Overview Undervalued
Rating: OUTPERFORM*
Price (15 July 19, US$):
32.00
Target Price (US$):
36.77
52-Week Price Range:
12.40 – 36.60
Market Cap. (US$ b):
2.838
Enterprise Value (US$ b):
3.121
*Target Price is for 12 months
In my professional opinion I believe
the stock of Yeti Holdings, Inc. to be
slightly undervalued at its current
price.
Given its growth in sales and gross
margin, and, I find a valuation of
$36.77 to be more appropriate for
the company as we await the
release of their Q2 earnings.
Yeti is an emerging growth company with a strong brand
following and a mission to design, innovate, and distribute
premium and durable products to an expanding customer
base. The main product lines include coolers, related
equipment and accessories, and drinkware. While the
company continues to innovate new products, one of its key
focus areas has been on the execution of expansion plans- of
both its customer base and physical footprint. This year Yeti
is making steady progress to open stores in both Charleston,
SC and Chicago, IL and additionally has identified key markets
in China as well as the U.K. and E.U. (I’ll be keeping an eye
out for Yeti pannier bags in Amsterdam.) The company
currently has a physical presence in the U.S.A, Canada,
Australia, and Japan.
Yeti boasts a market cap of $2.838 billion while its stock is up
32% MTD with earnings on the horizon. Despite having
significantly smaller market cap than the rest of the recent
IPO suite, YETI’s stock price has increased by over 89% since
its IPO price following only Beyond Meat which is up nearly
600% since its IPO! Maybe we throw out the outlier on this
one. (See Figure 1.)
At its highest, Yeti has eclipsed a threshold of 136% YTD. On
the trading days of 4/29/2019 and 4/30/2019 the company’s
shares were trading at $36, DOUBLE the company’s IPO price
in October 2018 just half a year after its debut on the NYSE.
With its attractive financial profile, good financial health
including strong sales growth and gross margin, the company
has conservatively alluded to strong future performance.
While YETI’s products are popular among seasoned travelers,
those with an affinity for outdoor activities, and trendy
millennials- its stock ranks popular with a bullish outlook
among individual traders, institutional investors, ESG
conscious investors, value stock investors, and hedge fund
managers.
ACCUMULATE RECOMMENDATION/COMPANY UPDATE

5. 5
Competitive Landscape
(Figure 1 above.)
Compared to its colleagues of new
market arrivals, it is clear Yeti is
performing considerably well. But what
about compared to the overall market? I
will use the S&P 500 as a proxy for the
market. And it still looks pretty good
here for Yeti. Over the last month Yeti
has outperformed the S&P 500 in the
last 17 of 22 trading days by an average
of almost 150 basis points per diem. See
table. →
Now that we have examined YETI in-
relation to comparable recent IPOs and
in the broader context of the overall
market let’s focus on comparing YETI to
other companies sharing its sector.
When I first started following YETI I was
surprised to learn the company was not
classified as a retail stock but rather as a
Leisure stock and part of the S&P 500
Apparel, Accessories, and Luxury goods
index. Other prominent companies
driving this sector include: Netflix,
Wyndham, and Roku, per IBD.
YETI DAILY
GAIN
S&P 500 DAILY
GAIN
6/11/2019 2.25% -0.03% Outperform
6/12/2019 0.93% -0.20% Outperform
6/13/2019 4.25% 0.41% Outperform
6/14/2019 -0.84% -0.16% Underperform
6/15/2019
6/16/2019
6/17/2019 -0.85% 0.09% Underperform
6/18/2019 4.63% 0.97% Outperform
6/19/2019 1.00% 0.30% Outperform
6/20/2019 -0.14% 0.95% Underperform
6/21/2019 3.33% -0.13% Outperform
6/22/2019
6/23/2019
6/24/2019 -4.93% -0.17% Underperform
6/25/2019 -0.50% -0.95% Outperform
6/26/2019 0.04% -0.12% Outperform
6/27/2019 3.44% 0.38% Outperform
6/28/2019 1.33% 0.58% Outperform
6/29/2019
6/30/2019
7/1/2019 2.83% 0.77% Outperform
7/2/2019 -1.68% 0.29% Underperform
7/3/2019 3.42% 0.77% Outperform
7/4/2019
7/5/2019 0.17% -0.18% Outperform
7/6/2019
7/7/2019
7/8/2019 2.24% -0.48% Outperform
7/9/2019 5.19% 0.12% Outperform
7/10/2019 2.70% 0.45% Outperform
7/11/2019 1.40% 0.23% Outperform
Outperform 17
Underperform 5
IPO % Change IPO DATE
Beyond Meat 25.00 596.80% May-19
Yeti 18.00 88.67% Oct-18
Pinterest 19.00 37.37% Apr-19
Slack 26.00 34.62% Jun-19
Uber 45.00 -2.24% May-19
Lyft 72.00 -14.10% Mar-19

6. 6
Leisure and recreation products
as a sector are up 38% since
January 1, 2019.
This industry is categorized by
heavy consumer spending on
discretionary goods and services
such as golf courses or hotels. A
decline in unemployment and
simultaneous rise in wages is
driving consumer spending and
confidence up, leading to a
promising industry outlook for
companies in this sector and
corresponding expected gains.
I have defined the sector to
include the companies listed in the
table to the left, per IBD’s weekly
report, as a starting point for
comparison.
From the broader economic
standpoint, the companies
comprising this sector are highly
sensitive to macroeconomic
factors- such as tax rates and
interest rates. One such example
includes a policy that cut the
corporate tax rate from 35% to
21% for certain companies- an
event that materially impacted
Yeti’s financials.
Per both IBD and Zack’s, though their indexes consistent of slightly different companies, both sources show
their respective sector to be up YTD and steadily outpacing the S&P 500. My conclusions agree and thus far
have supported Yeti outperforming its sector and its sector outperforming S&P 500. When coupled with the
fact that consumer sentiment is undeniably positive (The University of Michigan’s consumer sentiment index
for the U.S. was revised to 98.2 from 97.9 just last month; over the next two quarters the index is predicted to
rise further and settle at around 122.) The increased consumer spending that accompanies positive consumer
sentiment is especially desirable for companies in this sector. For a rookie like Yeti, there’s a lot of room to run.
RokuA
YetiHoldings
Avis Budget
SeaWorldEnt
PlanetFitness
Netflix
ChurchI
LiveNatn
Ctrip
FoxFactory
MarriottV
Clarus
Marriott
BoydGm
EldoradoRsrts
ChoiceH
Huazhu
HiltonGrnVaca
Expedia
LasVegas
MGMResr
HiltonW
RoyalCa
BookingHdgs
Wyndham
Polaris
Uber*
VailRes
*Data from 1/1/2019 not available, all months of available data are accounted included.
0.71%
234.36%
13.68%
10.18%
9.57%
8.94%
5.41%
22.24%
20.19%
19.00%
18.52%
15.18%
32.67%
26.63%
26.44%
24.81%
22.46%
43.94%
39.54%
39.18%
38.76%
36.97%
57.30%
46.32%
44.75%
44.34%
43.98%
% Change in price since beginning of 2019
118.16%

7. 7
Key performance ratios
From a top down approach, we have seen the Yeti clearly stands out among a strong suite of industry
competition. From a bottom up approach, the company’s financial health is supported internally, and its
growth made viable by its transparent and carefully constructed financial statements. A few of YETI’s key
financial ratios that I’ve elected to focus on believing them to be effective indicators of the company’s
financial position and financial performance are its revenue, EBITDA, and select performance ratios. This
sectional will take a largely technical approach with the following section on valuation taking a more
fundamental based approach.
Revenue
Yeti’s Q1 earnings show an increase in sales from where they were this time, last year of $20,096 (in thousands
$) from $135K 2018-Q1 to $155K 2019-Q1.
In its annual report the company said it would focus on growth strategies including both introducing new
products and expanding its customer base and consumer engagement (through playlists, podcasts and social
media.) The early success of these strategies is evidenced in the strong increase in sales figures. Yeti’s
omnichannel distribution and multipronged strategy drove sales into new demographics through use of brand
ambassadors, wholesalers (national names plus over 4,800 independent retail partners) and direct to
consumer outlets. The company seeks to further accelerate its DTC and corporate sales which should further
positively impact its sales growth throughout the year.
2018
JAN $778M DEC
ROLLING YEAR
4-18 $799M 4-19
These figures illustrate $21M more in
sales over the last rolling 12-month
period indicting YETI’s sales are
increasing by 2.5%.

8. 8
EBITDA
EBITDA was up 25% from last year, raising from $53,945 to $67,843.
Given the increase in sales, the corresponding increase in EBITDA can be attributed to rising or additional expenses. (I.e.
higher variable costs such as storage costs for inventory or costs incurred to hire additional employees are common
costs that a recently public and rapidly expanding company like Yeti would be expected to face in its operations.
Financial Performance Ratios
Working Capital T/O- An activity ratio measuring how efficiently YETI is utilizing its assets on a day by day basis to
generate revenue.
Cash ratio- With a simpler capital structure and straightforward balance sheet, YETI’s cash ratio measures its cash and
any other short-term marketable securities divided by its current liabilities to assess the company’s liquidity in extreme
circumstances. As a newer company with expansion plans, this ratio almost serves as a mini stress test for a company
showing its ability to meet its immediate ST obligations. The company has either a line or letter of credit it can draw on
if necessary so I think that offsets some of the risk of not having a lot of cash. (page 38 of 10k)
Debt to Capital ratio-A solvency ratio used to measure the company’s leverage and ability to meet its long-term
obligations. As mentioned, Yeti has a simple capital structure: 1 outstanding term loan and a revolving line of credit.
I want to focus on a few probability ratios to wrap this section up before moving onto valuation ratios. We will look at
YETI’s gross profit margin, operating profit margin, net profit margin and ROE before moving on.
• Gross Profit Margin
• Operating Profit Margin
• Net Profit Margin
• ROE

9. 9
Using Yeti’s first quarter earnings and industry averages, the profitability ratios
reveal commonalities typically seen in companies within the first year of an IPO.
These include: less cash on hand leading to lower liquidity ratios, higher debt-to-
capital ratios meaning less solvency and working capital that is heavily funded by
inventory and accounts receivable. These factors ultimately lead to newer public
companies operating less efficiently than its peer companies in some areas.
The company’s overall profitability measured by ROE can be broken down further
into individual functions of its efficiency, operating profitability, taxes, and use of financial leverage. (Cite CFA
book.)
The DuPont model is an extremely useful indicator of profitability and can be further broken down to show
the effects of Yeti’s tax burden (21% rate presently), interest burden (as the company has a loan with a
floating rate), and EBIT Margin on overall trends in a company’s ROE.
Ratios
Activity
Liquidity
Profitability
Solvency
Valuation
Working Capital T/O:
Yeti…1.53 days
Cash:
Yeti… 0.46
Debt-to-Capital:
Yeti…0.90
Gross profit margin:
Yeti…50.68%
Industry…59.26%
Operating profit
margin:
Yeti…5.65%
Industry…10.64%
Net profit margin:
Yeti…1.39%
Industry…9.32%
ROE:
Yeti…6.73%
Industry…12.76%
Page 11
Return on equity= NET PROFIT MARGIN (1.39%) x TTL ASSET T/O (0.3076) x LEVERAGE (15.67) = ~6.70%

10. 10
Valuation Analysis
We can assess Yeti’s attractiveness as an investment by using select valuation ratios and a discounted cash flow model
to value the company’s equity. The valuation approach I will take includes analyzing the company’s P/E ratio, EV/EBITDA
multiple, and an FCF model.
EPS, Trailing Price-to-Earnings, Forward Price-to-Earnings, PEG
Simply put, a company’s P/E ratio will
relate its Earnings per Share to the share
price and expresses the relationship
between price per share and the amount
of earnings attributable to a single share-
or, how much an investor in common
stock pays per dollar of earnings (Cite CFA
book for definition.)
Since YETI is a newer public company, we
have limited EPS data. I relied upon data
from three quarterly reports- 9/2018,
12/2018, and 3/2019, as well as analyst
estimates and Wall Street consensus
forecasts.
Once we have estimated EPS we are able to derive a Forward P/E ratio. On its own, this ratio tells very little, we must
compare it to a benchmark. As a point of reference, the P/E ratio of the Leisure sector is 17%. Yeti’s P/E is considerably
high in comparison but based on conclusions already drawn, this shows strong potential for growth especially as Yeti
grows its DTC sales.
December-18 December-17 December-16
Net income 57,763 15,401 47,977
Weighted avg
common shares o/s-
basic 81,777 81,479 81,097
Weighted avg
common shares o/s-
diluted 83,519 82,972 82,755
EPS
Basic 0.71$ 0.19$ 0.59$
Diluted 0.69$ 0.19$ 0.58$
Trailing P/E 32.45 - -
Fiscal Year Ended
Jun-19 Sep-19 FY 2019 FY 2020
EPS Forecast 0.27$ 0.25$ 0.95$ 1.20$
ForwardP/E 30.71 34.55 26.64 21.09
Forecast 12-month ForwardPEG 1.59$

11. 11
As mentioned, one challenge that comes with valuing a newly public company is its limited financial data.
When combined with industry challenges already faced, i.e. Yeti’s sales are highly sensitive to seasonality, it
further complicates the analysis. I’ve included a table that compares Yeti to Canada Goose (a retail stock that
IPO-ed 3-2017) and Callaway Golf (a more established company in the same sector as Yeti); all three
companies’ earnings are impacted by the seasonality effect- showing strongest earnings typically in the second
and fourth quarters of the year.
EPS P/E EPS P/E
Yeti 0.71 32.45 0.77 31.98
Canada Goose 0.97 45.07 0.97 49.51
Callaway Golf 1.08 14.61 0.93 17.13
Dec-18 Mar-19
*Leisure Industry P/E Avg= 17.5

12. 12
Risks
One material weakness identified by the company in its 10-K is its internal control over financial reporting.
The company goes on to further explain that this material weakness is related to ineffective information
technology general controls (ITGCs.) As of its 10-Q results, the company is enacting a remediation plan to
strengthen controls.
Yeti’s largest shareholder is a private equity firm, Cortec Group (Fund V.) A couple of the other portfolio
companies held by Cortec in the fund include: Harmar, a healthcare product company and Vidaris, a specialty
architectural and engineering consulting firm. As newly public and quite profitable, the PE firm could
potentially look to an exit strategy from Yeti in three to seven years.
The company’s exclusive customization partner, Rambler On, was consolidated as a variable interest entity
(VIE.) Typically, a VIE is established as a special purpose vehicle (SPV) that is intended to hold securitized
assets and absorb R&D related expenses off the balance sheet. SPVs, while legal and can offer some
protection to a company, have been misused in the past and warrant additional disclosure and transparency.
Yeti’s first debt arrangement is a $1.5 million promissory note with Rambler On carries a fixed rate. However,
Yeti’s debt second debt arrangement, Revolving Credit Facility of $100 million and a floating rate Credit
Facility loan of $445 million. As of the beginning of the second quarter, Yeti had $320.0 million principal
balance outstanding on the loan. The term loan requires a payment of $11.1 on 5/2019. There is associated
interest rate risk on the loan which is linked to the LIBOR (which was 6.35% at EOY 2018 and comparatively
5% for the fixed rate note.)
Yeti’s indebtedness subjects it to debt covenants. Some of which are “negative,” and restrict certain company
operations, like paying dividends. Others of which are “positive” and require the company to comply with
minimum total net leverage and interest coverage ratios. Though Yeti has not breached any covenants to this
point, if it were to, the company’s liquidity position and operations could be materially harmed.
There is a high level of concentration risk associated with Yeti’s manufacturing operations. The majority of its
hard and soft cooler production as well as the entirety of some product lines (bags) are produced in China.
Yeti is working to shift its supply chain and is pursuing a higher diversification of manufacturing partners.
However, international outsourcing could be impacted still by political risks (trade barriers) and currency risk
(more on this below.)

13. 13
Yeti is exposed to foreign exchange rate risk with the following currencies: Canadian Dollar, Australian Dollar,
Japanese Yen and Chinese Yuan.
Yeti’s fixed costs are largely controllable as it continues to scale its business, but one significant variable cost
that the company must keep tabs on is that of the raw materials used in procurement of its products.
Like many companies that produce innovative and unique products, Yeti has faced infringement from its
competitors. The company has been involved in minor, sporadic trademark lawsuits- i.e. “Yetti.” The costs
arising from legal risk should not have a material impact on earnings at this point in time.
The last risk I want to highlight is that of stock options vesting. Yeti’s stock options are set to begin vesting in
July as well as the first week of August. This impact will not effect the company’s second quarter earnings but
we could start seeing movement in the share price leading up to earnings as a result.

14. 14
Earnings Expectations
In Yeti’s second quarter earnings we can expect to see the following:
➢ Payment of $11.1 towards outstanding principal of Term Loan A.
➢ Updates on the remediation plan regarding the companies ITGCs.
➢ Options vesting.
➢ Update on how the USA stores are progressing and more insight regarding the international markets under
consideration.
➢ More diversification in terms of manufacturing as the company said it would try to find another supplier for its
category of “Other” products (dog bowls, t-shirts, etc.) as China is currently its only manufacturer for that
product category.