WebEx is the global leader in software-as-a-service (SaaS) applications for collaborative business on the web. WebEx applications enhance high-touch business processes, such as sales and training, with efficient web-touch interactions
In short, you can organize a virtual meeting over the internet using a browser with multiple users where one person would be the presenter. He could share his desktop or a certain application running on his PC. He could use it to make presentations, demos , sales calls. Basically, it helps in collaborative work.
The Silicon Valley-based company founded in 1996, owns 65 percent of the surging global market for Web conferencing, according to a recent report from market researchers at Frost & Sullivan. WebEx dominates players as big as Microsoft, and its annual revenues have jumped from $81 million in 2001 to $360 million in 2006, making it one of the fastest-growing technology companies.
More than 3.5 million people use WebEx every month to communicate and collaborate online. Webex is continously innovating newer solutions,provides excellent state of the art security and outstanding service.
The company's secret sauce is a global, proprietary, IP-based multimedia network of switches, running parallel to the Internet and called the MediaTone Network. WebEx offers versions of its service designed for providing web meeting, product support, training, Web seminars, and more, but its Meeting Center is the central service.
Webex has recently entered into the corporate instant messaging market place as well.
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The Companies financials are excellent (from yahoo finance)
The company acquired a company in India in 2004-2005.
The company is Debt free. Has 360Million in cash out of a market cap of 1.8Billion. Its still very small compared to its growth potential for the next 10 years.
Management Team:
The CEO has been at the helm right from the beginning.
Market cap : 1.8Billion
Forward P/e : 23
Return on Assets (ttm): 13.81%
Return on Equity (ttm): 12.45%
Revenue growth : 24%
Revenue (ttm): 361.77M
Total Cash (mrq): 302.78M
Debt : 0
Held by Insiders: 11.43%
------------------------------------------
The company has 25,000 customers. Have a look
http://www.webex.com/overview/customers_all.html
The only points of concern are:
1) increased competition may erode margins. However, increased usage, volumes will help offset some of this.
2) Threat of microsoft. Most IT companies have this threat. However, webex has kept ahead of all competition for last 10 years. I dont think this will change any time soon. I spoke to a manager in MSFT and he said , webex has functionality that is 2 years ahead of the competition.
I feel this should be a great investment over the next 5 years. I bought this in 2003 at 22$. I was a novice investor then and took some profits at 28,34,40$ levels. However, of late i have been reading on fool.com about companies such as these that you should hold for as long as possible, unless the companies potential changes.
Wednesday, January 24, 2007
Arch Capital Group, Ltd (ACGL)
"Arch Capital Group, Ltd., through its wholly owned subsidiaries, provides insurance and reinsurance products worldwide. The company operates in two segments, Reinsurance and Insurance. The Reinsurance segment reinsures third party liability and workers' compensation exposures; individual property risks that include both personal lines and commercial property exposures; other specialty lines, including nonstandard automobile, multiline contracts, surety, accident and health, trade credit, and political risk; catastrophic perils, such as hurricane, earthquake, flood, tornado, hail, and fire; and marine business, which includes coverage for hull, cargo, transit and offshore oil, and gas operations, as well as aviation business; and nontraditional business. The Insurance segment focuses on casualty, professional liability, programs, property, marine and aviation, construction and surety, healthcare, executive assurance, healthcare, and other. Its products are marketed principally through licensed independent brokers and wholesalers in Bermuda, the United States, Canada, and Europe. Arch Capital Group was founded in 1995 and is based in Hamilton, Bermuda." (source : yahoo.com)
Market Cap (intraday): 5.18B
Forward P/E (fye 31-Dec-07) 1: 8.26
PEG Ratio (5 yr expected): 0.65
Price/Sales (ttm): 1.54
Return on Equity (ttm): 19.95%
Revenue (ttm): 3.37B
Total Cash (mrq): 1.08B
Total Debt (mrq): 300.00M
Operating Cash Flow (ttm): 1.60B
Levered Free Cash Flow (ttm): -25.27M
% Held by Insiders4: 80.18%
I am long in this company since it was 41$.
I had run some screen and it came on the top of the list and i bought it based on that. I have seen some articles on ACGL in TMF.
Market Cap (intraday): 5.18B
Forward P/E (fye 31-Dec-07) 1: 8.26
PEG Ratio (5 yr expected): 0.65
Price/Sales (ttm): 1.54
Return on Equity (ttm): 19.95%
Revenue (ttm): 3.37B
Total Cash (mrq): 1.08B
Total Debt (mrq): 300.00M
Operating Cash Flow (ttm): 1.60B
Levered Free Cash Flow (ttm): -25.27M
% Held by Insiders4: 80.18%
I am long in this company since it was 41$.
I had run some screen and it came on the top of the list and i bought it based on that. I have seen some articles on ACGL in TMF.
Zenith National Insurance ZNT
Hi,
I was running a screen on yahoo and came across ZNT.It was 2nd in the list after another insurer ACGL ,that i own, which i had decided to buy earlier when it popped up in a similar screen.
Zenith is in the workers compensation insurance business. It has exited the reinsurance business (due to extended losses incurred due to Katrina) and a real estate development business. The reinsurance business was in the red for 3 consecutive years.
The company does business mainly in Florida and California, although it is licensed to do business in 46 states.
The company sports a market cap of 1.7B
Revenue 1.1B
ROE 30%
Profit Margin (ttm): 20.71%
Operating Margin (ttm): 32.51%
Cash is 675Million
Insiders 13%
Dividend yield 3% (Payout Ratio 17%)
If someone can look at this and may be run a DCF on it, i will appreciate.
Disclosure : Own shares of ACGL.
I was running a screen on yahoo and came across ZNT.It was 2nd in the list after another insurer ACGL ,that i own, which i had decided to buy earlier when it popped up in a similar screen.
Zenith is in the workers compensation insurance business. It has exited the reinsurance business (due to extended losses incurred due to Katrina) and a real estate development business. The reinsurance business was in the red for 3 consecutive years.
The company does business mainly in Florida and California, although it is licensed to do business in 46 states.
The company sports a market cap of 1.7B
Revenue 1.1B
ROE 30%
Profit Margin (ttm): 20.71%
Operating Margin (ttm): 32.51%
Cash is 675Million
Insiders 13%
Dividend yield 3% (Payout Ratio 17%)
If someone can look at this and may be run a DCF on it, i will appreciate.
Disclosure : Own shares of ACGL.
Netgear (NTGR)
Many of us are familiar with Netgear. I have a netgear wireless router at home.
"NETGEAR, Inc. engages in the design, development, and marketing of networking products for home users and small business worldwide"
Netgear is a well known brand, with excellent products that are of good quality , design and appeal. They are very profitable, strong balance sheet with no debt (4.5$ per share cash), growing fast, they have a good international presence, international revenue is rising, good partnerships with retail and other industry partners.
They trade at a lowly forward p/e of 17 when they are growing over 20%.
Analysts are expecting them to grow atleast 15% for the next 5 years.
Demand for networking products is growing and there is good potential internationally in India, China, Europe,
Market Cap (intraday): 885.39M
Forward P/E (fye 31-Dec-07) 1: 17.27
PEG Ratio (5 yr expected): 1.33
Price/Sales (ttm): 1.67
Price/Book (mrq): 3.22
Operating Margin (ttm): 11.08%
Management Effectiveness
Return on Assets (ttm): 10.95%
Return on Equity (ttm): 14.64%
Revenue (ttm): 531.33M
Qtrly Revenue Growth (yoy): 36.20%
Gross Profit (ttm): 151.70M
EBITDA (ttm): 68.65M
Net Income Avl to Common (ttm): 36.55M
Diluted EPS (ttm): 1.06
Qtrly Earnings Growth (yoy): -7.10%
Total Cash (mrq): 151.09M
Total Cash Per Share (mrq): 4.479
Total Debt (mrq): N/A
Total Debt/Equity (mrq): N/A
Current Ratio (mrq): 3.154
Book Value Per Share (mrq): 8.158
Operating Cash Flow (ttm): 4.09M
Levered Free Cash Flow (ttm): -27.25K
% Held by Insiders: 11.98%
"NETGEAR, Inc. engages in the design, development, and marketing of networking products for home users and small business worldwide"
Netgear is a well known brand, with excellent products that are of good quality , design and appeal. They are very profitable, strong balance sheet with no debt (4.5$ per share cash), growing fast, they have a good international presence, international revenue is rising, good partnerships with retail and other industry partners.
They trade at a lowly forward p/e of 17 when they are growing over 20%.
Analysts are expecting them to grow atleast 15% for the next 5 years.
Demand for networking products is growing and there is good potential internationally in India, China, Europe,
Market Cap (intraday): 885.39M
Forward P/E (fye 31-Dec-07) 1: 17.27
PEG Ratio (5 yr expected): 1.33
Price/Sales (ttm): 1.67
Price/Book (mrq): 3.22
Operating Margin (ttm): 11.08%
Management Effectiveness
Return on Assets (ttm): 10.95%
Return on Equity (ttm): 14.64%
Revenue (ttm): 531.33M
Qtrly Revenue Growth (yoy): 36.20%
Gross Profit (ttm): 151.70M
EBITDA (ttm): 68.65M
Net Income Avl to Common (ttm): 36.55M
Diluted EPS (ttm): 1.06
Qtrly Earnings Growth (yoy): -7.10%
Total Cash (mrq): 151.09M
Total Cash Per Share (mrq): 4.479
Total Debt (mrq): N/A
Total Debt/Equity (mrq): N/A
Current Ratio (mrq): 3.154
Book Value Per Share (mrq): 8.158
Operating Cash Flow (ttm): 4.09M
Levered Free Cash Flow (ttm): -27.25K
% Held by Insiders: 11.98%
Jacobs Engineering Group (JEC)
I met a friend who recently was hired at Jacobs Engineering Group (JEC). He said he was working over time like 12 hours a day on avg. I asked him about the company.
"JEC provides a range of technical, professional and construction services. It provides project services, which include engineering, design, architectural, and similar services; process, scientific, and systems consulting services; operations and maintenance services, and construction services, which include direct-hire construction and construction management services. It concentrates its services on selected industry groups and markets, including oil and gas exploration, production and refining; programs for various federal governments; pharmaceuticals and biotechnology; chemicals and polymers; buildings, which includes projects in the fields of healthcare and education, as well as civic, governmental and other buildings; infrastructure and technology and manufacturing." source http://finance.google.com
He said business is great. they are getting lot of work from oil refiners and explorers such as BP, Valero, Chevron. He said that BP has the worst maintained pipelines and they helped BP in the Alaska field.
He said the Oil related companies are flush with cash and are spending on renovation and new technologies for the future. That was a good insight into the Oil Sector to me as i own shares of Valero.
http://finance.yahoo.com/q/ks?s=JEC
I looked at the financials and they look good.
Market Cap (intraday): 4.83B
Forward P/E (fye 30-Sep-08) 1: 17.72
PEG Ratio (5 yr expected): 1.35
Price/Sales (ttm): 0.66
Price/Book (mrq): 3.43
Return on Assets (ttm): 7.20%
Return on Equity (ttm): 15.21%
Revenue (ttm): 7.42B
Qtrly Revenue Growth (yoy): 30.30%
Qtrly Earnings Growth (yoy): 53.30%
Diluted EPS (ttm): 3.27
Total Cash (mrq): 434.07M
Total Debt (mrq): 92.15M
Total Debt/Equity (mrq): 0.065
% Held by Insiderss: 2.75%
Seems like good numbers to me. Considering the inside scoop on the business, the work and the trend in the industry, seems like a good company to keep an eye on or even open a small position.
Its rated 5Star on the caps.
"JEC provides a range of technical, professional and construction services. It provides project services, which include engineering, design, architectural, and similar services; process, scientific, and systems consulting services; operations and maintenance services, and construction services, which include direct-hire construction and construction management services. It concentrates its services on selected industry groups and markets, including oil and gas exploration, production and refining; programs for various federal governments; pharmaceuticals and biotechnology; chemicals and polymers; buildings, which includes projects in the fields of healthcare and education, as well as civic, governmental and other buildings; infrastructure and technology and manufacturing." source http://finance.google.com
He said business is great. they are getting lot of work from oil refiners and explorers such as BP, Valero, Chevron. He said that BP has the worst maintained pipelines and they helped BP in the Alaska field.
He said the Oil related companies are flush with cash and are spending on renovation and new technologies for the future. That was a good insight into the Oil Sector to me as i own shares of Valero.
http://finance.yahoo.com/q/ks?s=JEC
I looked at the financials and they look good.
Market Cap (intraday): 4.83B
Forward P/E (fye 30-Sep-08) 1: 17.72
PEG Ratio (5 yr expected): 1.35
Price/Sales (ttm): 0.66
Price/Book (mrq): 3.43
Return on Assets (ttm): 7.20%
Return on Equity (ttm): 15.21%
Revenue (ttm): 7.42B
Qtrly Revenue Growth (yoy): 30.30%
Qtrly Earnings Growth (yoy): 53.30%
Diluted EPS (ttm): 3.27
Total Cash (mrq): 434.07M
Total Debt (mrq): 92.15M
Total Debt/Equity (mrq): 0.065
% Held by Insiderss: 2.75%
Seems like good numbers to me. Considering the inside scoop on the business, the work and the trend in the industry, seems like a good company to keep an eye on or even open a small position.
Its rated 5Star on the caps.
Ambassadors Group (EPAX)
The "5 more top stocks" article on Dec 22 picqued my interest.
http://www.fool.com/investing/small-cap/2006/12/22... I looked at Ambassadors group. I really like what i see
Ambassadors Group, Inc., also known as Ambassadors Education Group, operates as an educational travel company that organizes and promotes international and domestic programs for students, athletes, and professionals.
This is a small nice company and is highly profitable. It has been around for 50 years.
- Market Cap (intraday): 611.94M
- Revenue : 90Million
- It has 120Million Cash.
- Profit margins are great.(over 30%)
- ROE and ROA over 30 and 18% respecively.
- Dividend.: The company has been consistently increasing dividends since it was spun off in 2003. It stands at 1.6% yield with a 30% payour ratio. A small company with increasing dividends is not a common phenomenon.
- Insider Holding : over 20%
- Stock repurchase program. : The company has increased its stock repurchase program by another 11million to the existing 14million that was executed already.
- Generating great FCF.
The business is not capital intensive.
Few things to note from its annual report
- The business is seasonal. The programs are generating revenue in 2nd and 3rd quarter. However on annual basis, the company is profitable.
- There is currency risk as payments are made in other currencies. Management hedges against currencies to guard against it.
- Dependent on travel industry, prices. Risks such as global terrorism can impact it.
- Dependent on its contract / deal with "People to People" program. They have a deal till 2010 and can be renewed till 2020.
- Competition from other companies.
Positive things
- long operating history in this field
- people will use their services irrespective of economy. (??)
------------------------------------------
Market Cap (intraday): 611.94M
Enterprise Value (24-Dec-06)3: 491.65M
Trailing P/E (ttm, intraday): 23.05
Forward P/E (fye 31-Dec-07) 1: 19.76
PEG Ratio (5 yr expected): 1.56
FINANCIAL HIGHLIGHTS
Fiscal Year
Fiscal Year Ends: 31-Dec
Most Recent Quarter (mrq): 30-Sep-06
Profitability
Profit Margin (ttm): 30.60%
Operating Margin (ttm): 39.77%
Management Effectiveness
Return on Assets (ttm): 18.07%
Return on Equity (ttm): 32.49%
Income Statement
Revenue (ttm): 89.23M
Revenue Per Share (ttm): 4.345
Qtrly Revenue Growth (yoy): 24.00%
Gross Profit (ttm): 66.45M
EBITDA (ttm): 37.28M
Net Income Avl to Common (ttm): 27.30M
Diluted EPS (ttm): 1.28
Qtrly Earnings Growth (yoy): 17.00%
Balance Sheet
Total Cash (mrq): 120.75M
Total Cash Per Share (mrq): 5.809
Total Debt (mrq): 433.00K
Total Debt/Equity (mrq): 0.004
Current Ratio (mrq): 3.152
Book Value Per Share (mrq): 4.657
Cash Flow Statement
Operating Cash Flow (ttm): 32.69M
Levered Free Cash Flow (ttm): 18.64M
http://www.fool.com/investing/small-cap/2006/12/22... I looked at Ambassadors group. I really like what i see
Ambassadors Group, Inc., also known as Ambassadors Education Group, operates as an educational travel company that organizes and promotes international and domestic programs for students, athletes, and professionals.
This is a small nice company and is highly profitable. It has been around for 50 years.
- Market Cap (intraday): 611.94M
- Revenue : 90Million
- It has 120Million Cash.
- Profit margins are great.(over 30%)
- ROE and ROA over 30 and 18% respecively.
- Dividend.: The company has been consistently increasing dividends since it was spun off in 2003. It stands at 1.6% yield with a 30% payour ratio. A small company with increasing dividends is not a common phenomenon.
- Insider Holding : over 20%
- Stock repurchase program. : The company has increased its stock repurchase program by another 11million to the existing 14million that was executed already.
- Generating great FCF.
The business is not capital intensive.
Few things to note from its annual report
- The business is seasonal. The programs are generating revenue in 2nd and 3rd quarter. However on annual basis, the company is profitable.
- There is currency risk as payments are made in other currencies. Management hedges against currencies to guard against it.
- Dependent on travel industry, prices. Risks such as global terrorism can impact it.
- Dependent on its contract / deal with "People to People" program. They have a deal till 2010 and can be renewed till 2020.
- Competition from other companies.
Positive things
- long operating history in this field
- people will use their services irrespective of economy. (??)
------------------------------------------
Market Cap (intraday): 611.94M
Enterprise Value (24-Dec-06)3: 491.65M
Trailing P/E (ttm, intraday): 23.05
Forward P/E (fye 31-Dec-07) 1: 19.76
PEG Ratio (5 yr expected): 1.56
FINANCIAL HIGHLIGHTS
Fiscal Year
Fiscal Year Ends: 31-Dec
Most Recent Quarter (mrq): 30-Sep-06
Profitability
Profit Margin (ttm): 30.60%
Operating Margin (ttm): 39.77%
Management Effectiveness
Return on Assets (ttm): 18.07%
Return on Equity (ttm): 32.49%
Income Statement
Revenue (ttm): 89.23M
Revenue Per Share (ttm): 4.345
Qtrly Revenue Growth (yoy): 24.00%
Gross Profit (ttm): 66.45M
EBITDA (ttm): 37.28M
Net Income Avl to Common (ttm): 27.30M
Diluted EPS (ttm): 1.28
Qtrly Earnings Growth (yoy): 17.00%
Balance Sheet
Total Cash (mrq): 120.75M
Total Cash Per Share (mrq): 5.809
Total Debt (mrq): 433.00K
Total Debt/Equity (mrq): 0.004
Current Ratio (mrq): 3.152
Book Value Per Share (mrq): 4.657
Cash Flow Statement
Operating Cash Flow (ttm): 32.69M
Levered Free Cash Flow (ttm): 18.64M
McKesson Corp (MCK)
About McKesson:(MCK)
"McKesson Corporation supplies information and care management products and services for the healthcare industry. The company operates in three segments: Pharmaceutical Solutions, Medical-Surgical Solutions, and Provider Technologies. The Pharmaceutical Solutions segment distributes ethical and proprietary drugs, and health and beauty care products throughout North America. It also manufactures and sells automated pharmaceutical dispensing systems for retail pharmacies; provides medical management and specialty pharmaceutical solutions for biotech and pharmaceutical manufacturers; patient and other services for payors; and software, and consulting and outsourcing services to pharmacies. The MedicalSurgical Solutions segment distributes medicalsurgical supplies, and firstaid products and equipment; and provides logistics in the United States and Canada. The Provider Technologies segment delivers enterprise-wide patient care, clinical, financial, supply chain, managed care, and strategic management software solutions; automated pharmaceutical dispensing systems for hospitals; and outsourcing and other services to healthcare organizations throughout North America, the United Kingdom, and other European countries. It markets its products and services to integrated delivery networks, hospitals, physician group practices, home health providers, and managed care providers in the U.S. and internationally. McKesson Corp. was founded in 1833 and is headquartered in San Francisco, California. (source finance.yahoo.com)
- 87Billion in revenue (Ranked 16 in Fortune 500)
- 15Billion Market Cap
- Founded in 1833
- $54.42 (01/12/2007)
Pharma Solns : 83.4Billion revenue, # 1 in US, Canada, Mexico, # 1 Generics distributor
Medical surgical solns: #1 in primary care, rapid growth in physician office and pharma and equipment. Growth driver., 2Billion revenue
Provider technologies: 63% of health systems. Emerging business in UK, France.1.5Billion revenues. Higher margins.
Relationships:
Walmart, Target, Caremark, Aetna, Costco, Riteaid, Cigna, safewat, Omnicare
Growth:
2000 Revenue 37Billion
2006 Revenue 86 Billion (16% cagr)
EPS:
2000 : 0.65
2006 : 2.44 (25% CAGR)
CashFlow:
6.3billion in last 4.5 years
Returns to shareholders:
Measured share reinvestments (1.8B) and dividend growth (0.3B), acquisitions (1.2B) and internal investments(1.3B).
Growth drivers:
Large volume of branded drugs scheduled for conversion.
Good relationships with manufacturers and customers
Demographics driving drug utilization.
Provider technologies:
strong relationships,comprehensive suite, highly rates customer support,
physician and consumer directed healthcare opps,
Financials
Market Cap (intraday): 16.11B
Revenue (ttm): 91.80B
Profit Margin (ttm): 0.90%
Operating Margin (ttm): 1.24%
Forward P/E (fye 31-Mar-08) 1: 17.44
Price/Sales (ttm): 0.17 (So low!!)
Price/Cash Flow Ratio 13.30
Price/Book Value 2.72
P/E Ratio 5-Year High 29.1
P/E Ratio 5-Year Low 11.2
Return on Assets (ttm): 3.48%
Return on Equity (ttm): 15.12%
Total Cash (mrq): 2.25B
Total Cash Per Share (mrq): 7.616
Total Debt (mrq): 984.00M
Dividend yield : 0.4% (payout ratio 9%)
FCF : 1.3Billion (very small capex)
% Held by Insiders: 0.14%
Valuation
This is my first attempt at Valuing a company using the Future Value/ Present Value technique from Tom E.
Assumptions : Discount Rate : 12, Number of years : 5
Avg Scenario: (analysts expect 13% growth)
Future Value : $87.88 (assuming 13% eps growth with a terminal P/E of 18)
Present Value : $49.87
Rosy Scenario: (surgical and technology divisions can be growth drivers)
Future Value : $106.60 (assuming 15% eps growth with a terminal P/E of 20)
Present Value : $60.489
Dooms day scenario:
Future Value : $62.52 (assuming 11% eps growth with a terminal P/E of 14 )
Present value : $35.47
Assuming you take the avg scenario, the company could become attractive at 50$ or so.
"McKesson Corporation supplies information and care management products and services for the healthcare industry. The company operates in three segments: Pharmaceutical Solutions, Medical-Surgical Solutions, and Provider Technologies. The Pharmaceutical Solutions segment distributes ethical and proprietary drugs, and health and beauty care products throughout North America. It also manufactures and sells automated pharmaceutical dispensing systems for retail pharmacies; provides medical management and specialty pharmaceutical solutions for biotech and pharmaceutical manufacturers; patient and other services for payors; and software, and consulting and outsourcing services to pharmacies. The MedicalSurgical Solutions segment distributes medicalsurgical supplies, and firstaid products and equipment; and provides logistics in the United States and Canada. The Provider Technologies segment delivers enterprise-wide patient care, clinical, financial, supply chain, managed care, and strategic management software solutions; automated pharmaceutical dispensing systems for hospitals; and outsourcing and other services to healthcare organizations throughout North America, the United Kingdom, and other European countries. It markets its products and services to integrated delivery networks, hospitals, physician group practices, home health providers, and managed care providers in the U.S. and internationally. McKesson Corp. was founded in 1833 and is headquartered in San Francisco, California. (source finance.yahoo.com)
- 87Billion in revenue (Ranked 16 in Fortune 500)
- 15Billion Market Cap
- Founded in 1833
- $54.42 (01/12/2007)
Pharma Solns : 83.4Billion revenue, # 1 in US, Canada, Mexico, # 1 Generics distributor
Medical surgical solns: #1 in primary care, rapid growth in physician office and pharma and equipment. Growth driver., 2Billion revenue
Provider technologies: 63% of health systems. Emerging business in UK, France.1.5Billion revenues. Higher margins.
Relationships:
Walmart, Target, Caremark, Aetna, Costco, Riteaid, Cigna, safewat, Omnicare
Growth:
2000 Revenue 37Billion
2006 Revenue 86 Billion (16% cagr)
EPS:
2000 : 0.65
2006 : 2.44 (25% CAGR)
CashFlow:
6.3billion in last 4.5 years
Returns to shareholders:
Measured share reinvestments (1.8B) and dividend growth (0.3B), acquisitions (1.2B) and internal investments(1.3B).
Growth drivers:
Large volume of branded drugs scheduled for conversion.
Good relationships with manufacturers and customers
Demographics driving drug utilization.
Provider technologies:
strong relationships,comprehensive suite, highly rates customer support,
physician and consumer directed healthcare opps,
Financials
Market Cap (intraday): 16.11B
Revenue (ttm): 91.80B
Profit Margin (ttm): 0.90%
Operating Margin (ttm): 1.24%
Forward P/E (fye 31-Mar-08) 1: 17.44
Price/Sales (ttm): 0.17 (So low!!)
Price/Cash Flow Ratio 13.30
Price/Book Value 2.72
P/E Ratio 5-Year High 29.1
P/E Ratio 5-Year Low 11.2
Return on Assets (ttm): 3.48%
Return on Equity (ttm): 15.12%
Total Cash (mrq): 2.25B
Total Cash Per Share (mrq): 7.616
Total Debt (mrq): 984.00M
Dividend yield : 0.4% (payout ratio 9%)
FCF : 1.3Billion (very small capex)
% Held by Insiders: 0.14%
Valuation
This is my first attempt at Valuing a company using the Future Value/ Present Value technique from Tom E.
Assumptions : Discount Rate : 12, Number of years : 5
Avg Scenario: (analysts expect 13% growth)
Future Value : $87.88 (assuming 13% eps growth with a terminal P/E of 18)
Present Value : $49.87
Rosy Scenario: (surgical and technology divisions can be growth drivers)
Future Value : $106.60 (assuming 15% eps growth with a terminal P/E of 20)
Present Value : $60.489
Dooms day scenario:
Future Value : $62.52 (assuming 11% eps growth with a terminal P/E of 14 )
Present value : $35.47
Assuming you take the avg scenario, the company could become attractive at 50$ or so.
Aspreva Pharma (ASPV)
About ASPV:
"Aspreva Pharmaceuticals Corporation engages in the identification, development, and commercialization of new indications for approved drugs and late stage drug candidates for patients living with less common diseases. It is conducting clinical development programs to evaluate CellCept in the treatment of autoimmune diseases, such as lupus nephritis, myasthenia gravis, and pemphigus vulgaris; as well as in the treatment of cardiovascular disease. The company was founded by Richard M. Glickman and Noel F. Hall. Aspreva Pharmaceuticals was incorporated in 2001 and is headquartered in Victoria, Canada." (source http://finance.yahoo.com)
The company comes up in the Modified Foolish 8 screen on HG and also on a screen I had run recently.
The description above does not make for easy reading or understanding. With this in mind, I exchanged some emails with IR at Aspreva. They offered to talk to me over the phone on a conference call.
This is my humble attempt to explain what Aspreva does in simple terms.
Before considering any company for investment, one must understand what the company does , what is the business model, what is the value added by the company to consumers.
What ASPV does
Aspreva does not manufacture any drugs. The company piggy backs (partners) with major drug manufacturers (Roche) and helps them out by conducting clinical trials of an existing drug, that is FDA approved to treat some conditions/ diseases. However, ASPVs view is that the same drug could potentially be used to treat other diseases/ conditions as well. However, the big pharma companies do not have the time, money ,energy to go after these other potential uses of the same drug. Also, if the trials were to fail, the drug company could lose some face value in the eyes of the medical community and investor world. So they choose instead to partner with Aspreva. So this is the value provided by ASPV to the drug manufacturers.
Partnership with Roche
Now for some more details. Roche has a drug called CellCept that has been on the market for around 10 years. It has got FDA approval for certain conditions. ASPV has partnered with Roche (their only partnership to date) since 2003. They have been conducting clinical trials for 3 rare diseases. These diseases are classified as 'autoimmune diseases' and this segment is under served. The deal with Roche is that beyond a certain sales number, the revenue is shared 50-50 (after Roche charges for distribution of the drugs)
Clinical trial
Now about the clinical trials. ASPV conducts these trials at their own expense. They have to follow the FDA regulations in terms of sample size and locations. Most drugs have 3 stages of testing. Stage 1 is on animals. Stage 2 is on small sample of humans. Stage 3 is the serious trials. ASPV conducts trials in stage 3. Trials can last from 6months - 2 years.
For the trials to be a success, the patients have to show a certain measurable improvement by taking the drug. If this is achieved and ASPV feels the results to be a success, they can apply for FDA approval.
If the FDA approves the drug, then the drugs can then be marketed as a cure/medicine for those conditions. The bottom line would be an increase in the sales of these drugs.
Current status of trials
Out of the 3 symptoms, CellCept failed to produce successful results for one of them. So, ASPV did not apply for FDA approval. The major push now is to complete the trials for "lupus nephritis". This should be complete by end of Q1. Then, if ASPV is confident of the results,they will apply for FDA approval, which can take 6months. This particular drug is already being used (even though its not marketed for it as it has not got approval). They have high confidence on this one as there is lot of research data on the results from this drug. Currently there is no apporoved drug for Lupus. Each patient pays 6000$ per year on CellCept currently (as per IR).
Financials
Market Cap (intraday): 648.92M
Enterprise Value (11-Jan-07)3: 424.77M
Trailing P/E (ttm, intraday): 5.75
Forward P/E (fye 31-Dec-07) 1: 5.52
PEG Ratio (5 yr expected): 0.28
Price/Sales (ttm): 3.15
Price/Book (mrq): 2.63
Enterprise Value/Revenue (ttm)3: 2.05
Enterprise Value/EBITDA (ttm)3: 3.358
FINANCIAL HIGHLIGHTS
Fiscal Year
Fiscal Year Ends: 31-Dec
Most Recent Quarter (mrq): 30-Sep-06
Profitability
Profit Margin (ttm): 59.02%
Operating Margin (ttm): 60.26%
Management Effectiveness
Return on Assets (ttm): 36.95%
Return on Equity (ttm): 65.84%
Income Statement
Revenue (ttm): 207.35M
Revenue Per Share (ttm): 6.004
Qtrly Revenue Growth (yoy): 185.70%
Gross Profit (ttm): 76.48M
EBITDA (ttm): 126.51M
Net Income Avl to Common (ttm): 122.38M
Diluted EPS (ttm): 3.31
Qtrly Earnings Growth (yoy): 687.40%
Balance Sheet
Total Cash (mrq): 228.09M
Total Cash Per Share (mrq): 6.699
Total Debt (mrq): 532.00K
Total Debt/Equity (mrq): 0.002
Current Ratio (mrq): 7.768
Book Value Per Share (mrq): 7.286
Cash Flow Statement
Operating Cash Flow (ttm): 120.80M
Levered Free Cash Flow (ttm): 63.21M
Management
ASPV management has good experience in this field. They seem to have the vision and most of the team that formed the company are still there.
Closing thoughts
The company is a one to watch out for. The company is focussed on the results of CellCept for Lupus and for getting FDA approval this year. If this happens, they will receive a big boost. I would personally wait and see how this pans out. With such companies, you will get a chance to enter later as well. I have changed my investment thesis to looking for some good cues or some margin of safety. I am willing to wait for a while, for the company to prove to me that they are worthy of my hard earned, well saved, investment dollars!!.
"Aspreva Pharmaceuticals Corporation engages in the identification, development, and commercialization of new indications for approved drugs and late stage drug candidates for patients living with less common diseases. It is conducting clinical development programs to evaluate CellCept in the treatment of autoimmune diseases, such as lupus nephritis, myasthenia gravis, and pemphigus vulgaris; as well as in the treatment of cardiovascular disease. The company was founded by Richard M. Glickman and Noel F. Hall. Aspreva Pharmaceuticals was incorporated in 2001 and is headquartered in Victoria, Canada." (source http://finance.yahoo.com)
The company comes up in the Modified Foolish 8 screen on HG and also on a screen I had run recently.
The description above does not make for easy reading or understanding. With this in mind, I exchanged some emails with IR at Aspreva. They offered to talk to me over the phone on a conference call.
This is my humble attempt to explain what Aspreva does in simple terms.
Before considering any company for investment, one must understand what the company does , what is the business model, what is the value added by the company to consumers.
What ASPV does
Aspreva does not manufacture any drugs. The company piggy backs (partners) with major drug manufacturers (Roche) and helps them out by conducting clinical trials of an existing drug, that is FDA approved to treat some conditions/ diseases. However, ASPVs view is that the same drug could potentially be used to treat other diseases/ conditions as well. However, the big pharma companies do not have the time, money ,energy to go after these other potential uses of the same drug. Also, if the trials were to fail, the drug company could lose some face value in the eyes of the medical community and investor world. So they choose instead to partner with Aspreva. So this is the value provided by ASPV to the drug manufacturers.
Partnership with Roche
Now for some more details. Roche has a drug called CellCept that has been on the market for around 10 years. It has got FDA approval for certain conditions. ASPV has partnered with Roche (their only partnership to date) since 2003. They have been conducting clinical trials for 3 rare diseases. These diseases are classified as 'autoimmune diseases' and this segment is under served. The deal with Roche is that beyond a certain sales number, the revenue is shared 50-50 (after Roche charges for distribution of the drugs)
Clinical trial
Now about the clinical trials. ASPV conducts these trials at their own expense. They have to follow the FDA regulations in terms of sample size and locations. Most drugs have 3 stages of testing. Stage 1 is on animals. Stage 2 is on small sample of humans. Stage 3 is the serious trials. ASPV conducts trials in stage 3. Trials can last from 6months - 2 years.
For the trials to be a success, the patients have to show a certain measurable improvement by taking the drug. If this is achieved and ASPV feels the results to be a success, they can apply for FDA approval.
If the FDA approves the drug, then the drugs can then be marketed as a cure/medicine for those conditions. The bottom line would be an increase in the sales of these drugs.
Current status of trials
Out of the 3 symptoms, CellCept failed to produce successful results for one of them. So, ASPV did not apply for FDA approval. The major push now is to complete the trials for "lupus nephritis". This should be complete by end of Q1. Then, if ASPV is confident of the results,they will apply for FDA approval, which can take 6months. This particular drug is already being used (even though its not marketed for it as it has not got approval). They have high confidence on this one as there is lot of research data on the results from this drug. Currently there is no apporoved drug for Lupus. Each patient pays 6000$ per year on CellCept currently (as per IR).
Financials
Market Cap (intraday): 648.92M
Enterprise Value (11-Jan-07)3: 424.77M
Trailing P/E (ttm, intraday): 5.75
Forward P/E (fye 31-Dec-07) 1: 5.52
PEG Ratio (5 yr expected): 0.28
Price/Sales (ttm): 3.15
Price/Book (mrq): 2.63
Enterprise Value/Revenue (ttm)3: 2.05
Enterprise Value/EBITDA (ttm)3: 3.358
FINANCIAL HIGHLIGHTS
Fiscal Year
Fiscal Year Ends: 31-Dec
Most Recent Quarter (mrq): 30-Sep-06
Profitability
Profit Margin (ttm): 59.02%
Operating Margin (ttm): 60.26%
Management Effectiveness
Return on Assets (ttm): 36.95%
Return on Equity (ttm): 65.84%
Income Statement
Revenue (ttm): 207.35M
Revenue Per Share (ttm): 6.004
Qtrly Revenue Growth (yoy): 185.70%
Gross Profit (ttm): 76.48M
EBITDA (ttm): 126.51M
Net Income Avl to Common (ttm): 122.38M
Diluted EPS (ttm): 3.31
Qtrly Earnings Growth (yoy): 687.40%
Balance Sheet
Total Cash (mrq): 228.09M
Total Cash Per Share (mrq): 6.699
Total Debt (mrq): 532.00K
Total Debt/Equity (mrq): 0.002
Current Ratio (mrq): 7.768
Book Value Per Share (mrq): 7.286
Cash Flow Statement
Operating Cash Flow (ttm): 120.80M
Levered Free Cash Flow (ttm): 63.21M
Management
ASPV management has good experience in this field. They seem to have the vision and most of the team that formed the company are still there.
Closing thoughts
The company is a one to watch out for. The company is focussed on the results of CellCept for Lupus and for getting FDA approval this year. If this happens, they will receive a big boost. I would personally wait and see how this pans out. With such companies, you will get a chance to enter later as well. I have changed my investment thesis to looking for some good cues or some margin of safety. I am willing to wait for a while, for the company to prove to me that they are worthy of my hard earned, well saved, investment dollars!!.
TravelZoo (TZOO)
"Travelzoo Inc., an Internet media company, publishes travel offers from various travel companies. The company's publications include the Travelzoo Web sites, the Travelzoo Top 20 email newsletter, and the Newsflash email product. It also operates SuperSearch, a pay-per-click travel search engine. Travelzoo' products provide advertising opportunities for airlines, hotels, cruise lines, vacation packagers, and other travel companies. Its products also provide Internet users with a source of information on current sales and specials from various travel companies. The company offers its products through online marketing and direct marketing. It operates in the United States and the United Kingdom. Travelzoo was founded in 1998 and is based in New York City."
Travelzoo looks like a very interesting company.
It is a small cap, (Market Cap : 470.77M)
P/E : 36 (fwd p/e is 26)
Profit Margin (ttm): 21.55%
Operating Margin (ttm): 38.93%
Return on Assets (ttm): 35.16%
Return on Equity (ttm): 35.73%
Revenue : 65.77M
Cash : 28M
Rev growth: 30%+
Insider holding : 83%
Avg Volume : 600k (i read somewhere there is a min for a stock to be considered as a HG. Can some one tell me what that is and what that matters so much )
Only negative : Short is 36% of the float
A highly profitable company with a solid balance sheet, Extremely high insider holding and growing strongly.
The company makes all its money from advertising and offering good service to the consumers. It does not have to Sell tickets/ inventory online on its website like Expedia.com or Travelocity.com
The company is very light on CapEx.
Owner Run Rate is 15Million.
Cash King Margin is 25%
Travelzoo looks like a very interesting company.
It is a small cap, (Market Cap : 470.77M)
P/E : 36 (fwd p/e is 26)
Profit Margin (ttm): 21.55%
Operating Margin (ttm): 38.93%
Return on Assets (ttm): 35.16%
Return on Equity (ttm): 35.73%
Revenue : 65.77M
Cash : 28M
Rev growth: 30%+
Insider holding : 83%
Avg Volume : 600k (i read somewhere there is a min for a stock to be considered as a HG. Can some one tell me what that is and what that matters so much )
Only negative : Short is 36% of the float
A highly profitable company with a solid balance sheet, Extremely high insider holding and growing strongly.
The company makes all its money from advertising and offering good service to the consumers. It does not have to Sell tickets/ inventory online on its website like Expedia.com or Travelocity.com
The company is very light on CapEx.
Owner Run Rate is 15Million.
Cash King Margin is 25%
Taleo Corporation (TLEO)
Business Summary (from Yahoo finance) "Taleo Corporation provides enterprise talent management solutions that enable organizations to establish, automate, and manage worldwide staffing processes for professional, hourly, and temporary staff in North America and internationally. The company offers Taleo Enterprise Edition, which include Taleo Professional for managing professional, non hourly talent management functions, and attracting and evaluating candidates and employees; Taleo Hourly that provides screening and validated assessment content, skills matching and resume processing capabilities, reporting, configurable workflows, and third-party integration capabilities; Taleo Workforce Mobility, which helps align an organization's workforce with changing business needs; Taleo Agency that links organizations with staffing agencies; Taleo Assessment, which enables organizations to assess candidates' and employees' fit with organizational cultures and the needs; Taleo Integration that includes its toolkit, which integrates solutions with various ERP solution providers; Taleo Reporting that provides data analysis capabilities enabling customers to make process improvements; and Taleo ACE Benchmarking, which provides a strategic view of enterprise staffing initiatives to benchmark individual company performance. It provides Taleo Business Edition, which is designed for stand-alone departments and divisions of larger organizations, and staffing companies. The company also offers pre deployment classroom training, train-the-trainer programs, system administrator training, post-deployment specialty training, upgrade training, and e-learning/Web-based training. It serves technology, manufacturing, business services, consumer goods, retail, energy, healthcare, financial services, and transportation sectors. The company was founded by Martin Ouellet in 1998. It was formerly known as Recruitsoft, Inc. and changed its name to Taleo Corporation in March 2004. Taleo is headquartered in San Francisco, California."
How I found this company:
Over the last few years, I have ventured into the job market on a few occasions. Now, one can use job portals such as Monster.com, Dice.com , Yahoo Hotjobs, CareerBuilder.com as well as apply directly on the potential employers' websites. On several occasions, I have filled out a profile on the corporate websites. Last night, i was just checking up on some positions on some corporate websites. I was surprised to see that almost all the sites had a similar look and feel to the profile creation pages. When i scrolled at the bottom of the page, I saw that the pages were 'Powered by Taleo'. I found this at Citigroup.com , Fidelity.com among others.
I remembered seeing this over the last 3 years as well, but i had not paid attention to this. I went over to Yahoo finance and looked up the company. I found that Taleo is a public listed company on Nasdaq with the symbol TLEO.
The Business Model:
- Talent management is a rapidly growing market with last 4 year 15% CAGR.
- Subscription based enterprise talent management solutions. Potential client base is wide, across all industries as well as across all countries.
- 720 customers, 1/3 of fortune 100, 750,000 users in 100 countries in 15 languages. Offices in New York,London, Paris, Singapore,Chicago,Toronto,Sydney, Amsterdam.
- Average length of contract for Enterprise Edition is 3 years. Avg contract for business edition is 1 year.
- Since this is subscription based service, the customers have to keep renewing to use their services.
- High rate of renewals.
- High customer satisfaction. High ROI value proposition for customers.
30% reduction in cost of hire, 27% reduction in time to hire.
- Since this is a hosted solution, the customer does not have to deploy any software /hardware.
- Sales channel: Fidelity, Accenture, Hewitt, Convergys, ADP, Veritude, ExcellerateHRO, alexandermann.
The Financials:
Market Cap (intraday): 295.03M
Forward P/E (fye 31-Dec-07) : 40.97
Price/Sales (ttm): 3.14
Price/Cashflow : 178 (from money.msn.com)
Profitability:
Gross margin : 65%
Profit Margin (ttm): -3.13%
Operating Margin (ttm): -4.53%
Management Effectiveness
Return on Assets (ttm): -0.58%
Return on Equity (ttm): -7.18%
Income Statement
Revenue (ttm): 91.56M
Qtrly Revenue Growth (yoy): 25.00%
Diluted EPS (ttm): -0.17
Balance Sheet
Total Cash (mrq): 52.99M
Total Debt (mrq): 547.00K
% Held by Insiders: 45.33%
Shares Outstanding: 21.82M
Short % of Float (as of 12-Dec-06): 4.90%
Management:
Michael Gregoire is the President and CEO of Taleo. He has been at the helm since 2005. Prior to that, he worked at PeopleSoft and EDS in key positions.
Louis Tetu serves as Chairman of the Board of Directors of Taleo Corporation. In 1999, Mr. Tetu co-founded Recruitsoft, which was renamed Taleo in 2004.
Insiders own 45% stake in this small company. Always a great sign.
Valuation
The valuation for a non profitable enterprise is usally tricky. The company provides services that are in great demand and sales have been increasing. Worldwide sales for workforce performance management software and services will increase from 665Million in 2003 to 1683 Million in 2008. Currently, Taleo has less than 10% of the market share. If it can increase its market share to 10% of this market, revenues could rise to 168Million by 2008. However, margins continue to be negative. The company has long term operating margin target of 20%.
The company has some work to do achieve this target.
There are 15 analysts following this company, so it is not Hidden Gem. They are expecting 25% growth in the next 5 years. Since the EPS is currently -0.17, I could not use FV/PV valuation technique. Even if the EPS were to be 0.1 , the numbers that came out did not seem impressive.
Final word
Taleo is surely a company I would like to watch out for. At the current time, I would wait on the sidelines. I would like the company to report at least 1 or 2 quarters of consistent profits, EPS and good profit margins. If that happens, the valuation will be a bit more clear and my confidence in the investment potential will be stronger. It is possible that the stock may appreciate considerably by the time this happens. However, it is better to be safe than sorry. If the company can deliver on these counts, I would hope that investors could be rewarded for years to come. That said, if the company were to trade under 10$ in the next few months, I would be inclined to open a tiny position.
The Risks: The biggest investment risk is that this company is yet to turn a profit. On a Non-gaap basis, the company is guiding to EPS of 0.1 for 2006 on a 96-97Million revenue.
Source of research
- http://finance.yahoo.com
- http://money.msn.com
- www.tleo.com
How I found this company:
Over the last few years, I have ventured into the job market on a few occasions. Now, one can use job portals such as Monster.com, Dice.com , Yahoo Hotjobs, CareerBuilder.com as well as apply directly on the potential employers' websites. On several occasions, I have filled out a profile on the corporate websites. Last night, i was just checking up on some positions on some corporate websites. I was surprised to see that almost all the sites had a similar look and feel to the profile creation pages. When i scrolled at the bottom of the page, I saw that the pages were 'Powered by Taleo'. I found this at Citigroup.com , Fidelity.com among others.
I remembered seeing this over the last 3 years as well, but i had not paid attention to this. I went over to Yahoo finance and looked up the company. I found that Taleo is a public listed company on Nasdaq with the symbol TLEO.
The Business Model:
- Talent management is a rapidly growing market with last 4 year 15% CAGR.
- Subscription based enterprise talent management solutions. Potential client base is wide, across all industries as well as across all countries.
- 720 customers, 1/3 of fortune 100, 750,000 users in 100 countries in 15 languages. Offices in New York,London, Paris, Singapore,Chicago,Toronto,Sydney, Amsterdam.
- Average length of contract for Enterprise Edition is 3 years. Avg contract for business edition is 1 year.
- Since this is subscription based service, the customers have to keep renewing to use their services.
- High rate of renewals.
- High customer satisfaction. High ROI value proposition for customers.
30% reduction in cost of hire, 27% reduction in time to hire.
- Since this is a hosted solution, the customer does not have to deploy any software /hardware.
- Sales channel: Fidelity, Accenture, Hewitt, Convergys, ADP, Veritude, ExcellerateHRO, alexandermann.
The Financials:
Market Cap (intraday): 295.03M
Forward P/E (fye 31-Dec-07) : 40.97
Price/Sales (ttm): 3.14
Price/Cashflow : 178 (from money.msn.com)
Profitability:
Gross margin : 65%
Profit Margin (ttm): -3.13%
Operating Margin (ttm): -4.53%
Management Effectiveness
Return on Assets (ttm): -0.58%
Return on Equity (ttm): -7.18%
Income Statement
Revenue (ttm): 91.56M
Qtrly Revenue Growth (yoy): 25.00%
Diluted EPS (ttm): -0.17
Balance Sheet
Total Cash (mrq): 52.99M
Total Debt (mrq): 547.00K
% Held by Insiders: 45.33%
Shares Outstanding: 21.82M
Short % of Float (as of 12-Dec-06): 4.90%
Management:
Michael Gregoire is the President and CEO of Taleo. He has been at the helm since 2005. Prior to that, he worked at PeopleSoft and EDS in key positions.
Louis Tetu serves as Chairman of the Board of Directors of Taleo Corporation. In 1999, Mr. Tetu co-founded Recruitsoft, which was renamed Taleo in 2004.
Insiders own 45% stake in this small company. Always a great sign.
Valuation
The valuation for a non profitable enterprise is usally tricky. The company provides services that are in great demand and sales have been increasing. Worldwide sales for workforce performance management software and services will increase from 665Million in 2003 to 1683 Million in 2008. Currently, Taleo has less than 10% of the market share. If it can increase its market share to 10% of this market, revenues could rise to 168Million by 2008. However, margins continue to be negative. The company has long term operating margin target of 20%.
The company has some work to do achieve this target.
There are 15 analysts following this company, so it is not Hidden Gem. They are expecting 25% growth in the next 5 years. Since the EPS is currently -0.17, I could not use FV/PV valuation technique. Even if the EPS were to be 0.1 , the numbers that came out did not seem impressive.
Final word
Taleo is surely a company I would like to watch out for. At the current time, I would wait on the sidelines. I would like the company to report at least 1 or 2 quarters of consistent profits, EPS and good profit margins. If that happens, the valuation will be a bit more clear and my confidence in the investment potential will be stronger. It is possible that the stock may appreciate considerably by the time this happens. However, it is better to be safe than sorry. If the company can deliver on these counts, I would hope that investors could be rewarded for years to come. That said, if the company were to trade under 10$ in the next few months, I would be inclined to open a tiny position.
The Risks: The biggest investment risk is that this company is yet to turn a profit. On a Non-gaap basis, the company is guiding to EPS of 0.1 for 2006 on a 96-97Million revenue.
Source of research
- http://finance.yahoo.com
- http://money.msn.com
- www.tleo.com
Things to do before buying a stock:
1) First thing to know is what the company does and how it makes money. (or how it plans to make money).Understand the business model.
2) Understand its competition and how it compares to them. Is it best of breed ? Is it catching up with others. Does it
have a rule breaking product?
3) Look at the quality of management.See how long they have been there. How much experience they have in this field (maybe from
other places). Is the management share holder friendly. Too many options will be dilutive to earnings.
4) Look at the last few years of company performance to see if it is profitable. Are earnings and revenue growing?
Are margins improving or not ?
5) Look at the cash Flow statement to see if there is Cash flow growth. Look at cash flow from Operations - capex.
If cash from financing is more than cash from operations that is a negative sign. Look at change in inventories. Are they rising faster
than sales? Could be dangerous. also look at the change in accounts receivables. Calculate Cash King Margin
= FreeCashFlow / Annual Sales. Greater than 10% is good. More the better.
6) Look at the balance sheet to see how much cash the company has versus Long term debt. Is the debt reducing?
If the debt is increasing, what are they doing with it . expansion ? acquisition ? What is management plan
on reducing debt. Strong balance sheet will provide a margin of safety and cushion in bad times and such a company may be able to survive a temporary reversal of fortunes.
7) Does the company pay a dividend? what is the yield? Has the dividend increasing last few years/ quarters?
8) Does the company buy back stock?
9) Look at ROE, ROA, ROIC, net profit margin, gross margins. Earnings growth, revenue growth.
10) Look at income statement to see if revenues are increasing. Make sure cost of sales is not going up faster than revenue growth.
11) How are the companies products/services. Do you use them? Heard of them? Any good stories. If its a store, you can visit it to see
how customers shop there etc.
12) Ask questions you may have to the investor relations. Most companies have a good IR dept and reply by email/phone.
13) Categorise the company (a) fast grower (b) ever green/blue chips/stalwarts (c) turnaround (d) cyclical (e) asset play (f) slow grower
14) Look at the current p/e and compare it to its historical p/e range for last 5 years.( from moneycentral.msn.com or bigcharts.com)
15) Study a bit about the companies history. How long has it been operating.
--------------
Things to do when you buy the stock:
1) Write down the reasons you bought the stock in brief and your expectations from the purchase. Is it a speculation or a well informed
investment. Is it a long term holding or a short term play. can you explain the business model to some one else.
2) write down the date of purchase, the price paid per share, the P/e on the date of purchase. write down the EPS as well.
Things to do for a regular stock check up:
1) Read the quarterly report to see how the company did in the quarter. Was the company profitable. did revenues/profits increase. By how much.
2) Calculate the TTM EPS.
3) In the quarterly report, check out for the regular things that you analysed before buying the stock. (i m assuming you did) such as
margins, earnings growth, options expense, cash flow, debt, cash.
1) First thing to know is what the company does and how it makes money. (or how it plans to make money).Understand the business model.
2) Understand its competition and how it compares to them. Is it best of breed ? Is it catching up with others. Does it
have a rule breaking product?
3) Look at the quality of management.See how long they have been there. How much experience they have in this field (maybe from
other places). Is the management share holder friendly. Too many options will be dilutive to earnings.
4) Look at the last few years of company performance to see if it is profitable. Are earnings and revenue growing?
Are margins improving or not ?
5) Look at the cash Flow statement to see if there is Cash flow growth. Look at cash flow from Operations - capex.
If cash from financing is more than cash from operations that is a negative sign. Look at change in inventories. Are they rising faster
than sales? Could be dangerous. also look at the change in accounts receivables. Calculate Cash King Margin
= FreeCashFlow / Annual Sales. Greater than 10% is good. More the better.
6) Look at the balance sheet to see how much cash the company has versus Long term debt. Is the debt reducing?
If the debt is increasing, what are they doing with it . expansion ? acquisition ? What is management plan
on reducing debt. Strong balance sheet will provide a margin of safety and cushion in bad times and such a company may be able to survive a temporary reversal of fortunes.
7) Does the company pay a dividend? what is the yield? Has the dividend increasing last few years/ quarters?
8) Does the company buy back stock?
9) Look at ROE, ROA, ROIC, net profit margin, gross margins. Earnings growth, revenue growth.
10) Look at income statement to see if revenues are increasing. Make sure cost of sales is not going up faster than revenue growth.
11) How are the companies products/services. Do you use them? Heard of them? Any good stories. If its a store, you can visit it to see
how customers shop there etc.
12) Ask questions you may have to the investor relations. Most companies have a good IR dept and reply by email/phone.
13) Categorise the company (a) fast grower (b) ever green/blue chips/stalwarts (c) turnaround (d) cyclical (e) asset play (f) slow grower
14) Look at the current p/e and compare it to its historical p/e range for last 5 years.( from moneycentral.msn.com or bigcharts.com)
15) Study a bit about the companies history. How long has it been operating.
--------------
Things to do when you buy the stock:
1) Write down the reasons you bought the stock in brief and your expectations from the purchase. Is it a speculation or a well informed
investment. Is it a long term holding or a short term play. can you explain the business model to some one else.
2) write down the date of purchase, the price paid per share, the P/e on the date of purchase. write down the EPS as well.
Things to do for a regular stock check up:
1) Read the quarterly report to see how the company did in the quarter. Was the company profitable. did revenues/profits increase. By how much.
2) Calculate the TTM EPS.
3) In the quarterly report, check out for the regular things that you analysed before buying the stock. (i m assuming you did) such as
margins, earnings growth, options expense, cash flow, debt, cash.
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