"Given the stock's valuation, there is greater downside risk than upside potential to Salesforce.com," wrote Goldman Sachs analyst Sasa Zorovic. He reiterated his sell rating and $53 price target. 05/22/08
Another great quote from a great analyst.
Sales force is now $91.00
Thursday 8 July 2010
Overvalued Companies
The following companies are overvalued in my opinion most of them supported by either large shareholders or incompetent fund managers.
NILE (BLUE NILE) - PE Ratio 53 - Current Share Price 45.98
DG (DOLLAR GENERAL) - PE Ratio 23.76, massive debt , Share price 27.95
FAST (FASTNEAL) - PE Ratio -38 Share price 50.21 (A retailer with a cure for cancer)
ADSK (AUTODESK) - PE Ratio 45 Share Price 24.73 - Anyone would think they invented the iphone
COLM (COLUMBIA SPORTSWARE) - PE Ratio 23 - Share Price 45.68
S&P is currently 1060.
By contract PE ratio for Apple is 21.95.
NILE (BLUE NILE) - PE Ratio 53 - Current Share Price 45.98
DG (DOLLAR GENERAL) - PE Ratio 23.76, massive debt , Share price 27.95
FAST (FASTNEAL) - PE Ratio -38 Share price 50.21 (A retailer with a cure for cancer)
ADSK (AUTODESK) - PE Ratio 45 Share Price 24.73 - Anyone would think they invented the iphone
COLM (COLUMBIA SPORTSWARE) - PE Ratio 23 - Share Price 45.68
S&P is currently 1060.
By contract PE ratio for Apple is 21.95.
HELEN OF TROY (HELE) - Updated 8/7/2010
Earnings came in at around 0.60c against expectation of 58c Reported earnings were 59c including the impairment charge. Stripping out the impairment charge gives 60c underlying.
Historically the May quarter has the lowest earnings.
Net Income for the quarter was $18.3m. Extrapolating this at x4 provides for $73.2m in earnings. Market capitalization is $676m. This would be a simple PE of 9.23 excluding any growth.
EBITDA is $26.8m. Say $110m for the year. Using a discount rate of say 15% would provide a valuation of $733m. There is also a further $100m of assets after paying off all liabilities not to mention the property that the company hold. This would bring the valuation between $750 - 850m. About 10% higher than the current share price at a very conservative measure.
Update : Post results the stock has risen by around 5% to 23.17 (at the time of the posting) 8/7/2010.
Historically the May quarter has the lowest earnings.
Net Income for the quarter was $18.3m. Extrapolating this at x4 provides for $73.2m in earnings. Market capitalization is $676m. This would be a simple PE of 9.23 excluding any growth.
EBITDA is $26.8m. Say $110m for the year. Using a discount rate of say 15% would provide a valuation of $733m. There is also a further $100m of assets after paying off all liabilities not to mention the property that the company hold. This would bring the valuation between $750 - 850m. About 10% higher than the current share price at a very conservative measure.
Update : Post results the stock has risen by around 5% to 23.17 (at the time of the posting) 8/7/2010.
Wednesday 7 July 2010
HELEN OF TROY LIMITED - EARNINGS 8/7/2010
HELEN OF TROY (HELE)
Q1 2011 - 7/7/2010
Share Price 21.71. Earnings out 8/7/2010 before markets close.
Recommendation : Buy
Acquisition
Range of brands. Recent purchase of Sure (large market in UK) and Pert Plus (large shampoo market in US)
Paid $69m for the acquisiton.
Approximate sales from acquisition are expected to be around $65m. If assume a gross profit margin of 35% on this acquisition then they will make around $24m per annum on this purchase.
There will be a strain on the SG&A of around say $6m as a result of increased marketing and product support costs for this acquisition. This will still provide for a revenue stream of around $18m. This pays for the acquisition in around 4 years. If there is amortisation of the acquisition costs over 20 years. This will strain earnings by around $3.5m.
Net annual earnings from the acquistion should be around $14.5m with cash flow at around $18m.
Earnings Target
Earnings target for the year is $2.56.
Revenue is expected to be $161,320m.
Q1 sales for prior year were $143m. Including a 6% increase this will bring sales of the existing product range to $151m.
The acquisition is expected to bring in sales of around $65m. Assuming even spread of revenue this should bring in a further $15m. This will bring sales in around $168m. ?? Not sure why analyst are expecting $161m but will see.
The revenue target therefore seems a little off.
Earnings analysis
On $161m of revenue earnings will be $0.58c assuming SG&A stay where it is - based on analyst expectation.
Potential amortisation strain of Pert acquisition as goodwill is amortised.
SG&A Analysis : Incentive compensation costs were $7.06 million lower in fiscal 2009. Incentive compensation is a very high proportion of overall profits. Around 10%. The prior year SG&A was impacted in the main by compensation payments and increased due to the share price increase and low ball targets. We shouldn't see this happening again.
My view is that if I take the prior quarter earnings of $16,658m which gave around 55c and add on say a further $3m from the acquisition we should get around 63-65c prior to any one-time restructuring charges.
Stock Price
The stock price has underperformed the market over the last 3 months.
Other notes
Effective tax rate is around 10%
Overall
Both price earnings and valuation look cheap. The company has some debt but enough cash to pay it off. They are acquiring smaller companies to assist with growth and paying out of current cash flow. Although this hits earnings due to the amortisation of acquisition costs, the cash flow increases.
On a valuation basis the company is around $671m in market cap. Revenue is expected to be around $750m. There is also around $100m of assets left after paying off all short and long term liabilities.
Year ended Feb-10 earnings were $71.817m. The recent acquisition should add around $14.5m to that earnings stream. This brings net earnings to around $86.3m per annum giving a PE ratio of around 7.7m.
Cash flow from operating activities should be around $90m. Assuming all paid out as dividend in the absence of growth opportunities - this provides for a yield of around 13% on current market cap.
Q1 2011 - 7/7/2010
Share Price 21.71. Earnings out 8/7/2010 before markets close.
Recommendation : Buy
Acquisition
Range of brands. Recent purchase of Sure (large market in UK) and Pert Plus (large shampoo market in US)
Paid $69m for the acquisiton.
Approximate sales from acquisition are expected to be around $65m. If assume a gross profit margin of 35% on this acquisition then they will make around $24m per annum on this purchase.
There will be a strain on the SG&A of around say $6m as a result of increased marketing and product support costs for this acquisition. This will still provide for a revenue stream of around $18m. This pays for the acquisition in around 4 years. If there is amortisation of the acquisition costs over 20 years. This will strain earnings by around $3.5m.
Net annual earnings from the acquistion should be around $14.5m with cash flow at around $18m.
Earnings Target
Earnings target for the year is $2.56.
Revenue is expected to be $161,320m.
Q1 sales for prior year were $143m. Including a 6% increase this will bring sales of the existing product range to $151m.
The acquisition is expected to bring in sales of around $65m. Assuming even spread of revenue this should bring in a further $15m. This will bring sales in around $168m. ?? Not sure why analyst are expecting $161m but will see.
The revenue target therefore seems a little off.
Earnings analysis
On $161m of revenue earnings will be $0.58c assuming SG&A stay where it is - based on analyst expectation.
Potential amortisation strain of Pert acquisition as goodwill is amortised.
SG&A Analysis : Incentive compensation costs were $7.06 million lower in fiscal 2009. Incentive compensation is a very high proportion of overall profits. Around 10%. The prior year SG&A was impacted in the main by compensation payments and increased due to the share price increase and low ball targets. We shouldn't see this happening again.
My view is that if I take the prior quarter earnings of $16,658m which gave around 55c and add on say a further $3m from the acquisition we should get around 63-65c prior to any one-time restructuring charges.
Stock Price
The stock price has underperformed the market over the last 3 months.
Other notes
Effective tax rate is around 10%
Overall
Both price earnings and valuation look cheap. The company has some debt but enough cash to pay it off. They are acquiring smaller companies to assist with growth and paying out of current cash flow. Although this hits earnings due to the amortisation of acquisition costs, the cash flow increases.
On a valuation basis the company is around $671m in market cap. Revenue is expected to be around $750m. There is also around $100m of assets left after paying off all short and long term liabilities.
Year ended Feb-10 earnings were $71.817m. The recent acquisition should add around $14.5m to that earnings stream. This brings net earnings to around $86.3m per annum giving a PE ratio of around 7.7m.
Cash flow from operating activities should be around $90m. Assuming all paid out as dividend in the absence of growth opportunities - this provides for a yield of around 13% on current market cap.
Tuesday 6 July 2010
Analyst Recommendations AMSC
Wunderlich Securities equity analyst Theodore O'Neill reiterated a buy rating and $50 price target on shares of American Superconductor (AMSC) on June 18 2010. Price then was $31.44. Price now on 6th July 2010 is $26.66. Excellent call Theodore.
Analyst Recommendations
Janney Montgomery Scott equity analyst Sasa Zorovic reiterated a buy rating and $40 fair value estimate on shares of Adobe Systems (ADBE) - June 18th 2010. Stock Price then was $33.12. Price as at 6 July 2010 $26.28. Well done Sasa excellent call !
Thursday 18 March 2010
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