CASE STUDY: Delta Apparel (DLA)

November 21, 2021

From the company’s website:

“Delta Apparel, Inc., along with its operating subsidiaries, DTG2Go, LLC, Salt Life, LLC, and M.J. Soffe, LLC, is a vertically-integrated, international apparel company that designs, manufactures, sources, and markets a diverse portfolio of core activewear and lifestyle apparel products under the primary brands of Salt Life®, Soffe®, and Delta… The Company specializes in selling casual and athletic products through a variety of distribution channels and tiers, including outdoor and sporting goods retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants and e-retailers, the U.S. military, and through its business-to-business e-commerce sites.  The Company’s products are also made available direct-to-consumer on its websites… as well as through its branded retail stores.”

IMPORTANT:  DTG2Go is most important part of the company.  It is a “market leader in the direct-to-garment digital print and fulfillment industry, bringing technology and innovation to the supply chain of its customers.”  DTG2Go uses proprietary software to deliver on-demand, digitally printed apparel direct to consumers on behalf of the customer.

We bought DLA in late 2020 at an average cost of $15.26.  Today the stock is at $30.01, up about 96%.  But the stock is still quite undervalued.

Here are the original multiples for Delta Apparel from September 2020:

    • EV/EBITDA = 4.41
    • P/E = 7.38
    • P/B = 0.76
    • P/CF = 1.85
    • P/S = 0.28

Since then, the company has grown its earnings and cash flows.  Here are the normalized figures:  EBITDA is $75.3 million, net income is $38.2 million, cash flow is $120.3 million, and revenue is $597.9 million.

The market cap is $193.3 million, while the enterprise value (EV) is $320.5 million.

Here are the updated multiples:

    • EV/EBITDA = 4.26
    • P/E = 5.06
    • P/B = 1.23
    • P/CF = 1.61
    • P/S = 0.32

Delta Apparel has a Piotroski F-Score of 8, which is excellent.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  DLA has TL/TA of 63.4%, which is decent.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At DLA, insider ownership is approximately 16%.  This is good.

What is the intrinsic value?

See this very good writeup on Value Investors Club:

(You may have to register at, but it’s free.)

From the writeup:

DTG2Go’s proprietary software and logistics system enable it to seamlessly integrate with any of its customer’s websitesand for digitally printed apparel to be manufactured upon purchase, and shipped within 24-48 hours directly to the customer without them knowing DLA had anything todo with the process.  This model is simply a better mouse-trap for virtually any retailer, enabling them to lower costs, eliminate holding inventory, increase selection, and quicken delivery times.  Imagine how much more money a retailer would make if it could multiply the selection of printed apparel it offers on its website at no additional cost, and with no inventory?  Also imagine how much money a retailer could save by almost never having to write-down this type of inventory again?  DTG2Go’s platform allows them to do both – no-brainerThis platform can also give e-retailors future capabilities such as allowing consumers to customize their own clothing, which many say is a coming trend.  DTG2Go’s market opportunity is huge, and has barely entered its first inning of growth.  Digital impressions  only make up about 2% of total graphic impressions on clothing.  DLA believes the digital impression market could grow over 400% in the coming years, to 10% of graphic impressions on clothing.  Other commentators expect even greater penetration of digital printing.  Given the tremendous advantages of digital printing for many applications versus traditional screen printing, it seems highly likely that rapid growth of 30%+ will continue into the foreseeable future.  Many industry participants expect digital printing to eventually comprise 50%+ of the graphic impressions market due to its superior cost and selection characteristics. It is also important to note that digital printing is generally environmentally superior versus screen printing, because of the cleaner water based ink used in the digital process.
Intrinsic value scenarios:
    • Low case: If the company trades at a P/E of 10 based on trailing earnings, then the stock would be $29, which is 3% lower than today’s $30.01.
    • Mid case:  The company should trade for a P/E of at least 15 based on normalized earnings.  That would put the stock at $90 per share, which is 200% higher than today’s $30.01.
    • High case:  Normalized earnings could easily be closer to $52.3 million.  Given the huge growth opportunities for DTG2Go, the company should trade at a P/E at least 20.  That would be the stock at $150 per share, which is 400% higher than today’s $30.01.



An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.


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Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.