Date: 10 March 2009
Price: $18.74
P/E: 3.7
FP/E: 8.1
P/B: 0.8
Yield: 4.2%
Debt/Eq: 0
Company Description
Trendy, expensive clothing retailer.
Past 10 years
Actually looks pretty good. Sales and earnings have consistently grown. Free cash flow has been forthcoming, and book value has increased. They've never had any debt.
Pros
It's all about the history. This company has been very successful over the past 10 years - typically trading between 12 and 22 times earnings. So it's very cheap right now on any measure.
Cons
The downside is that the next couple of years are expected to be pretty grim. The mean earnings forecast for 2009 is 3.29 (giving P/E of around 5.9) and for 2010 it's 1.78 giving a P/E of 10.x. The company itself described Q42008 as a disaster for retailers (sales were generally down around 25% on last year), and gave the following comments on the upcoming year:
"The Company anticipates a difficult selling environment to persist throughout 2009 and believes there may be significant volatility in sales levels."
Of course this is all market worry rather than company specific concerns - and there doesn't seem to be much doubt that Abercrombie would remain profitable, just at a reduced level.
Conclusion
Yes - moderate buy.
Tuesday, 10 March 2009
SNY: Sanofi Aventis
Date: 10 March 2009
Price: $25.82
P/E: 9.25
FP/E: 6.2
P/B: 1.7
Yield: 6%
Debt/Eq: 0.08
Company Description
A French pharmaceutical company with an array of products. Top selling drug makes up 9% of sales, so they're not totally dependent on a single drug for their success.
Past 10 years
The financial history looks pretty encouraging. Sales have increased steadily, with a large bump in 2004 when they purchased another company. Book value has increased rapidly over the same period.
Earnings have been slightly less consistent, but still encouraging. Basically they rose from $0.43/share to $1.86/share between 1999 and 2003. Then the acquisition happened in 2004, and there was a $2.66/share loss. Then again we have consistent (and faster) growth from 2005 onwards, with EPS rising from $0.99 to $3.02, with an estimate of approximately $4/share for 2009.
Pros
Unlike most companies I've been looking at, SNY are actually expected to increase earnings quite significantly next year, giving a FP/E of around 6. It's also good to have some diversity in the portfolio, and certainly a European pharmaceutical company would give that. Basically that's it: they're cheap, growing, and different. That'll work.
Cons
It could be cheaper - some of the other companies we're looking at have P/Es as low as 4.x. They've made a bid to acquire Zentiva (an eastern European generic pharmaceutical company for $2.6B. Acquisitions are generally bad as there's plenty of scope for stuff to go wrong, but I'm not too worried about this as the acquisition is fairly small (net earnings for 2008 were $8B, so the acquisition can be made out of free cash flow).
Conclusion
Yes - I'd like to buy some stock in this company. Fairly strong buy.
Price: $25.82
P/E: 9.25
FP/E: 6.2
P/B: 1.7
Yield: 6%
Debt/Eq: 0.08
Company Description
A French pharmaceutical company with an array of products. Top selling drug makes up 9% of sales, so they're not totally dependent on a single drug for their success.
Past 10 years
The financial history looks pretty encouraging. Sales have increased steadily, with a large bump in 2004 when they purchased another company. Book value has increased rapidly over the same period.
Earnings have been slightly less consistent, but still encouraging. Basically they rose from $0.43/share to $1.86/share between 1999 and 2003. Then the acquisition happened in 2004, and there was a $2.66/share loss. Then again we have consistent (and faster) growth from 2005 onwards, with EPS rising from $0.99 to $3.02, with an estimate of approximately $4/share for 2009.
Pros
Unlike most companies I've been looking at, SNY are actually expected to increase earnings quite significantly next year, giving a FP/E of around 6. It's also good to have some diversity in the portfolio, and certainly a European pharmaceutical company would give that. Basically that's it: they're cheap, growing, and different. That'll work.
Cons
It could be cheaper - some of the other companies we're looking at have P/Es as low as 4.x. They've made a bid to acquire Zentiva (an eastern European generic pharmaceutical company for $2.6B. Acquisitions are generally bad as there's plenty of scope for stuff to go wrong, but I'm not too worried about this as the acquisition is fairly small (net earnings for 2008 were $8B, so the acquisition can be made out of free cash flow).
Conclusion
Yes - I'd like to buy some stock in this company. Fairly strong buy.
RDS.A: Royal Dutch Shell
Date: 10 March 2009
Price: $41.19
P/E: 3.42
FP/E: 6.7
P/B: 1.0
Yield: 7.8%
Debt/Eq: 0.2
Company Description
Huge oil company with a generous dividend policy. They do everything from exploration and drilling through to operating gas stations.
Note that these are the A shares, where the B shares are traded in the London Stock Exchange. This isn't anything to worry about - fundamentally by buying these shares we would be buying Shell.
Past 10 years
It all looks good. Sales, earnings, book value have all increased significantly - although it should be noted that over the past 5 years gas prices have also increased significantly... however Shell was doing well even during 2000-2005 when gas prices were fairly static.
It's interesting that P/E ratios have been consistently low these past 5 years - perhaps because gas prices have been high, and the market has been anticipating a fall.
Pros
This is all about the yield. But it's a yield in a huge multinational corporation with a solid balance sheet that prides itself on paying out a nice dividend - and indeed increased the dividend last year.
Cons
To what extent is stock price performance pegged to the price of oil? But if it is, then prices are currently far below the $130/barrel range we saw a year ago - more like $40-$50/barrel... but that's still high compared to $15-25 that we had 7 years ago.
Also, do we view big oil as 'bad' in some way - for environmental reasons for example? In which case should we not be investing?
Conclusion
Maybe. I think yes as part of a portfolio, but this would be a smaller buy compared to some of the others I think.
Price: $41.19
P/E: 3.42
FP/E: 6.7
P/B: 1.0
Yield: 7.8%
Debt/Eq: 0.2
Company Description
Huge oil company with a generous dividend policy. They do everything from exploration and drilling through to operating gas stations.
Note that these are the A shares, where the B shares are traded in the London Stock Exchange. This isn't anything to worry about - fundamentally by buying these shares we would be buying Shell.
Past 10 years
It all looks good. Sales, earnings, book value have all increased significantly - although it should be noted that over the past 5 years gas prices have also increased significantly... however Shell was doing well even during 2000-2005 when gas prices were fairly static.
It's interesting that P/E ratios have been consistently low these past 5 years - perhaps because gas prices have been high, and the market has been anticipating a fall.
Pros
This is all about the yield. But it's a yield in a huge multinational corporation with a solid balance sheet that prides itself on paying out a nice dividend - and indeed increased the dividend last year.
Cons
To what extent is stock price performance pegged to the price of oil? But if it is, then prices are currently far below the $130/barrel range we saw a year ago - more like $40-$50/barrel... but that's still high compared to $15-25 that we had 7 years ago.
Also, do we view big oil as 'bad' in some way - for environmental reasons for example? In which case should we not be investing?
Conclusion
Maybe. I think yes as part of a portfolio, but this would be a smaller buy compared to some of the others I think.
Monday, 9 March 2009
WES: Western Gas Partners
Date: 9 March 2009
Price: $12.63
P/E: n/a (recently IPOd)
FP/E: 9.3
P/B: 0.5ish
Yield: 8.2%
Debt/Eq: 0
Company Description
Another unit trust, set up to process and transport natural gas (not oil), and to pay out dividends. Dividend currently seems to be $0.30 a quarter, which is $1.20/year.
Past 10 years
Not much to go on - as the IPO was just last year. Apparently the parent company is well run and solid.
Pros
I'd like an 8% yield. :-)
Cons
We have very little information to go on. However the end of year results will be published tomorrow.
Conclusion
Maybe. I'll wait until I've seen the final results after tomorrow's close.
Update
Results for the year were roughly in line with expectations I think. Buy maybe I'm not understanding something, because my reading says that EPS is $0.77 on a price of $13/share, which is a P/E of approximately 15. And next year they're saying EBITDA (and presumably therefore EPS) could drop by upto 20%. So while I like the company, and like that they do transportation rather than directly selling gas, they seem overvalued right now. Maybe if the price drops to $7/share...
Price: $12.63
P/E: n/a (recently IPOd)
FP/E: 9.3
P/B: 0.5ish
Yield: 8.2%
Debt/Eq: 0
Company Description
Another unit trust, set up to process and transport natural gas (not oil), and to pay out dividends. Dividend currently seems to be $0.30 a quarter, which is $1.20/year.
Past 10 years
Not much to go on - as the IPO was just last year. Apparently the parent company is well run and solid.
Pros
I'd like an 8% yield. :-)
Cons
We have very little information to go on. However the end of year results will be published tomorrow.
Conclusion
Maybe. I'll wait until I've seen the final results after tomorrow's close.
Update
Results for the year were roughly in line with expectations I think. Buy maybe I'm not understanding something, because my reading says that EPS is $0.77 on a price of $13/share, which is a P/E of approximately 15. And next year they're saying EBITDA (and presumably therefore EPS) could drop by upto 20%. So while I like the company, and like that they do transportation rather than directly selling gas, they seem overvalued right now. Maybe if the price drops to $7/share...
EBF: Ennis, Inc
Date: 9 March 2009
Price: $6.98
P/E: 4.37
FP/E: 4.4 (only one estimate)
P/B: 0.5
Yield: 6.7%
Debt/Eq: 0.19
Introduction
This is a smaller company than the others I'm looking at, with a market cap of $180m. It seems to be basically two businesses under one umbrella - a "business forms" division, and an apparel division. So it has a rather confused identity, but is incredibly cheap on P/E.
Company Description
As above - business forms, and apparel. It looks like it acquired another business (perhaps the apparel division?) in about 2006, as it grew substantially that year.
Past 10 years
All looks good. Sales and earnings have consistently grown, with a bump in 2006, which coincided with more shares being issued - but even EPS has grown throughout that time.
Book value has also grown. Dividends have been paid at around the same level every year. The stock has never been highly valued - P/E ratio is typically in the range of 10-14, but obviously we have quite a way to go to reach such heights from here!
Pros
It looks like a simple business, which has been well run over the past 10 years - including a successful acquisition. P/E ratio is crazy, and the dividend yield is nice.
Cons
Forward looking statements in the 9-month results in December were very cautious: "we continue to believe the remainder of this fiscal year and the next will be extremely difficult for all companies. We are encouraged however, by how we have navigated these waters to date".
Conclusion
I like Ennis. Not so much as PAC perhaps, but I'd say that this a Buy.
Price: $6.98
P/E: 4.37
FP/E: 4.4 (only one estimate)
P/B: 0.5
Yield: 6.7%
Debt/Eq: 0.19
Introduction
This is a smaller company than the others I'm looking at, with a market cap of $180m. It seems to be basically two businesses under one umbrella - a "business forms" division, and an apparel division. So it has a rather confused identity, but is incredibly cheap on P/E.
Company Description
As above - business forms, and apparel. It looks like it acquired another business (perhaps the apparel division?) in about 2006, as it grew substantially that year.
Past 10 years
All looks good. Sales and earnings have consistently grown, with a bump in 2006, which coincided with more shares being issued - but even EPS has grown throughout that time.
Book value has also grown. Dividends have been paid at around the same level every year. The stock has never been highly valued - P/E ratio is typically in the range of 10-14, but obviously we have quite a way to go to reach such heights from here!
Pros
It looks like a simple business, which has been well run over the past 10 years - including a successful acquisition. P/E ratio is crazy, and the dividend yield is nice.
Cons
Forward looking statements in the 9-month results in December were very cautious: "we continue to believe the remainder of this fiscal year and the next will be extremely difficult for all companies. We are encouraged however, by how we have navigated these waters to date".
Conclusion
I like Ennis. Not so much as PAC perhaps, but I'd say that this a Buy.
ELY: Callaway Golf Company
Date: 9 March 2009
Price: $5.81
P/E: 5.59
FP/E: 6.6
P/B: 0.6
Yield: 4.8%
Debt/Eq: 0
Introduction
The ratios look pretty good. It's cheap based on earnings and book value. Yield is fairly good, and there's no debt.
Company Description
Callaway makes and sells various golfing equipment - clubs, balls, clothing etc - and have a number of well known brands.
Past 10 years
The results look patchy. There's steady sales growth over the whole period. The past 4 years have seen good earnings growth, but it seems that this is mostly because they hit a bad patch around 2004/05 which they have gradually recovered from... and have now returned to the levels they saw in the early years of the millennium. Cash flow is overall positive, but varies from year to year. The book value has been fairly static over the last 10 years - again moving up and down a bit. They seem to have been consistent with their dividend payouts, which is good.
The company has historically been valued on a high multiple of its earnings - with a P/E above 20 for much of the time - so that's encouraging given the current P/E.
Pros
The business is simple. Current trend is for increased earnings. Valuation is cheap. No debt. Has been highly valued in the past - currently at lowest price of last 10 years.
Cons
The financial history isn't giving me a warm fuzzy feeling. The balance sheet is sound, but I don't get the feeling that the company is growing in value over time. Having said that, if it stagnates, but continues to pay out 4.8% in dividends then that's a lot better than money in the bank right now.
Conclusion
Tentative yes? I'd buy these as part of my portfolio, but they'd probably get a relatively small chunk of money.
Price: $5.81
P/E: 5.59
FP/E: 6.6
P/B: 0.6
Yield: 4.8%
Debt/Eq: 0
Introduction
The ratios look pretty good. It's cheap based on earnings and book value. Yield is fairly good, and there's no debt.
Company Description
Callaway makes and sells various golfing equipment - clubs, balls, clothing etc - and have a number of well known brands.
Past 10 years
The results look patchy. There's steady sales growth over the whole period. The past 4 years have seen good earnings growth, but it seems that this is mostly because they hit a bad patch around 2004/05 which they have gradually recovered from... and have now returned to the levels they saw in the early years of the millennium. Cash flow is overall positive, but varies from year to year. The book value has been fairly static over the last 10 years - again moving up and down a bit. They seem to have been consistent with their dividend payouts, which is good.
The company has historically been valued on a high multiple of its earnings - with a P/E above 20 for much of the time - so that's encouraging given the current P/E.
Pros
The business is simple. Current trend is for increased earnings. Valuation is cheap. No debt. Has been highly valued in the past - currently at lowest price of last 10 years.
Cons
The financial history isn't giving me a warm fuzzy feeling. The balance sheet is sound, but I don't get the feeling that the company is growing in value over time. Having said that, if it stagnates, but continues to pay out 4.8% in dividends then that's a lot better than money in the bank right now.
Conclusion
Tentative yes? I'd buy these as part of my portfolio, but they'd probably get a relatively small chunk of money.
Sunday, 8 March 2009
PAC: Pacific Airport ADR
Date: 8 March 2009
Price: $15.16
P/E: 5.28
FP/E: 9.19
P/B: 0.5
Yield: 12.2%
Debt/Eq: 0
Introduction
Nice P/E, great yield, great P/B. No debt. The figures look really nice.
Company Description
This is a Mexican company, with a government contract to manage six of Mexico's ten busiest tourist airports for the next 40 years.
Past 10 years
Everything looks good. Revenues and earnings have consistently risen over the past 5 years (as long as data is available). The company consistently generates free cash flow. Shareholder's equity is consistently increasing too. All good. Also, the stock's valuation is low compared to its historic valuation - against P/E, P/B, P/S, P/CF. :-)
Pros
Everything looks good. All the financials are great. As a long term investment it should do really well, and it's insanely cheap.
Risks
On the down side, I'm sure tourist travel to/from Mexico will be hurt by the current economic crisis, but Q4 2008 was "only" 15% worse (all passengers) than Q4 2007, which really isn't that bad. I can live with the profit dropping for a bit - the price has that built in.
Also, it's a Mexican company - I don't know if there are any reasons to be concerned about that. Maybe different corporate governance laws in different places?
Conclusion
Yes. The next question is how much... and that's harder.
Price: $15.16
P/E: 5.28
FP/E: 9.19
P/B: 0.5
Yield: 12.2%
Debt/Eq: 0
Introduction
Nice P/E, great yield, great P/B. No debt. The figures look really nice.
Company Description
This is a Mexican company, with a government contract to manage six of Mexico's ten busiest tourist airports for the next 40 years.
Past 10 years
Everything looks good. Revenues and earnings have consistently risen over the past 5 years (as long as data is available). The company consistently generates free cash flow. Shareholder's equity is consistently increasing too. All good. Also, the stock's valuation is low compared to its historic valuation - against P/E, P/B, P/S, P/CF. :-)
Pros
Everything looks good. All the financials are great. As a long term investment it should do really well, and it's insanely cheap.
Risks
On the down side, I'm sure tourist travel to/from Mexico will be hurt by the current economic crisis, but Q4 2008 was "only" 15% worse (all passengers) than Q4 2007, which really isn't that bad. I can live with the profit dropping for a bit - the price has that built in.
Also, it's a Mexican company - I don't know if there are any reasons to be concerned about that. Maybe different corporate governance laws in different places?
Conclusion
Yes. The next question is how much... and that's harder.
Subscribe to:
Posts (Atom)
