Today we're buying 6.66% of capital, as usual, in Quiksilver (ZQK) shares. Since there's plenty of liquidity in this stock (it traded $100 M on Friday) we'll buy at or around the open.
Here's the analysis that justifies this recommendation:
«1. Introduction
ZQK came up on my technical filter yesterday. This technical filter searches for stocks with volume above average and above 1 million and a white candlestick on the day.
2. Profile
Quiksilver, Inc. (ZQK) engages in the design, production, and distribution of apparel, wintersports and golf equipment, footwear, accessories, and related products. (complete profile here (http://finance.yahoo.com/q/pr?s=ZQK))
3. Technical Analysis
3.1. All History Chart
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=30370;image)
ZQK's long term trend is bullish.
3.2. Medium Term Chart
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=30371;image)
The stock has moved up and down (mostly down) in 2005 and 2006, but lately it is consistently pushing higher. There was a golden cross in November and ZQK looks like it is heading to new all time highs above $18.12.
3.3. Short Term Chart
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=30372;image)
There was a powerful white candle on Friday, which was due to this news:
Quiksilver Inc. 4Q Net Income Jumps (http://biz.yahoo.com/ap/061214/earns_quiksilver.html?.v=1)
4. Fundamental Analysis
4.1. Number of Shares Outstanding
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=30373;image)
There has been some dilution over the years, which no shareholder likes, but not too much. The current market cap on a fully diluted basis is 128.3 million*$15.75 = $2.021 B.
4.2. Liquidity
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=30374;image)
(the y-axis is "current assets/current liabilities", not "million shares")
Quicksilver's balance sheet isn't strong but I don't see a liquidity problem within the company.
4.3. Revenues
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=30375;image)
(the y-axis is "million $", not "million shares")
Revenues were up every year for the past 13 years. Let's make a calculus to find what was the average annual revenue growth rate:
126*(X^13) = 2,362 <=> X^13 = 2,362/126 <=> X^13 = 18,746
<=> X = (18,746)^(1/13) <=> X = 1,2529 => X = 25.29%
ZQK shows pretty solid and predictable revenue growth. The sales multiple is $2.021 B/$2.362 B = 0.86. The Textile - Apparel Clothing industry average is 0.78.
4.4. Profits
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=30376;image)
(the y-axis is "$ per share", not "million shares")
EPS was down a bit in fiscal 2006, but it is expected to rebound to $0.91 in fiscal 2007. This gives me a forward earnings multiple of 17.3. The industry average is 22.
5. General Overview
I truly enjoy ZQK's historical revenue graph. It's a pity the EPS graph isn't so smooth. Anyway, Q4 fiscal 2006 was the strongest in the company's history in revenue and EPS terms. I wonder if with quarterly revenues of more than $700 M now the company isn't able to increase net profit margin on a sustainable basis.
For example, over in Q4 2005, net margin was 5.18%. This latest quarter it was 8.35%. If the historical revenue growth continues at a 25% pace, in 10 years ZQK will show annual revenues of 22 B. If the company is able to sustain a long term net profit margin of 8.35% like it had on the 4th quarter, net income in 2016 will be $1.8368 B, which translates into $14.32 EPS considering there's no additional dilution.
Apply a 20 times earnings multiple and get a $286.4 price per share in 2016. Annual average share price increase would then be:
15.75*(X^10) = 286.4 <=> X^10 = 18.1841 <=> X = (18.1841)^0.1
<=> X = 33.65%.
I like it (I like to see a number above 20% on this long term estimate to consider the stock as an attractive investment) ! ZQK shares certainly are attractive.»
6. Trading Plan
Buy ZQK today at or around the open, 6.66% of equity.
ZQK corrected a bit yesterday after that 8% surge on Friday. Now I see it touching support, previous resistance levels, before another leg up.
I'll review some of the fundamentals of this pick on my next update, running short on time now, I'll continue holding ZQK.
I said the following:
QuoteI like it (I like to see a number above 20% on this long term estimate to consider the stock as an attractive investment) !
But I remember that I read in "Buffettology" that his threshold for the long term EPS growth estimate was 16%. And his explanation for this makes perfect sense, which is:
The general market rose an average of 8% a year for the past 100 years. So he likes to see double of that to consider buying a stock.
This doesn't mean I'm buying ZQK because I want to hold it for a very long term. But this kind of calculus and estimates helps me see if the stock is attractive or not for long term investors, like Buffet and many other institutional investors.
Since I estimate long term EPS growth of 33% for ZQK, I think it definitely fits the criteria.
Technically the stock touched support, previous resistance levels and closed up on the day. I see it closing 2006 certainly above $16.
Nothing changed on ZQK, the stock is acting as expected, I'll keep on holding it.
Profit taking continued on ZQK. But I still perceive the market action as short term profit taking, the trend continues to be bullish.
Fundamentals are very attractive (as you can read on my initial analysis), I want to continue holding ZQK.
This latest quarter for ZQK was the strongest in ZQK's history, as you can see on the quarterly revenue graph below:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=30813;image)
EPS jumped a lot too, to $0.51. I wonder if this isn't a structural change to more profitability. You see, Quiksilver used to sell its merchandise on general stores, but over the latest years it has been opening its own stores, which usually translates into higher profit margins.
We'll see about quarterly EPS, gross and net profit margin evolution over the next updates. So far, the more I study ZQK, the more I like it.
I'll keep on holding ZQK.
Nothing new on ZQK today. We'll study the EPS, gross and net margins on the following updates, today I need time for the newest stocks at the 3 Stocks on Fire Portfolio.
I'll continue holding ZQK.
I'm starting to think that net profit margin (the ratio between net income and sales) is probably the most important indicator for retailers. On the graph below you can see how significant the latest quarter from ZQK was:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=30984;image)
ZQK was back to the 8% plus net profit margin. The last time the company did this was in Q1 2005, when it was trading around $18 a share.
I'll continue holding ZQK.
I've said we would study gross margin, here's the historical graph:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=31057;image)
This is pretty impressive. Stable and very high gross margin around 50%. This is what an investor likes to see.
Technically the stock is slowly, but surely, going to new highs above $16.08.
I'm starting to get more and more respect for stocks above $1 B in market cap as a long term investment. I could think they have less potential, but also the risk is a lot lower. Probably the lower risk compensates the lack of speculative power, and the long term potential ... can still be huge, because the world is a very large place, almost infinite.
I'll keep on holding ZQK.
ZQK didn't make it to close 2006 above $16, but that's not important for longer term purposes. It was up 13.8% in 2006, but 2007 will probably be better, as fundamentals improved dramatically over this latest quarter.
I'll continue holding ZQK.
Today I'm short on time so updates won't have the usual quality. ZQK was down a bit today, but the trend continues to be up and fundamentals are attractive. Nothing else to do but to keep on holding ZQK.
ZQK recovered some ground yesterday. This is a great stock to own for the long term, but it isn't a fast mover, we need to be patient with it. I'll be patient and keep on holding ZQK.
Nothing new on ZQK, just leaving the updated chart and saying I'll hold the stock.
I think the biggest Quiksilver's competitor is Billabong, don't you agree? I searched for "billabong stock" on google and found out Billabong is a publicly traded company in the Australia Stock Exchange.
Perhaps AussieTrader helps us finding the best website for technical and fundamental information on Australian stocks, I'll ask him that.
I just noticed Billabong's market cap is $3.5 B (http://stocks.us.reuters.com/stocks/overview.asp?symbol=BBG.AX) (I wonder if this is US dollars or Australian dollars).
ZQK's market cap is $1.87 B.
Technically nothing changed, just a small decline today, I'll continue holding ZQK.
AussieTrader gave me a hand but I still couldn't find much information for Billabong (there's a reason why the US markets attract people from all corners of the world).
I have this link for Yahoo Finance Australia: http://au.finance.yahoo.com/q?s=BBG.AX
I'll abandon the pursuit of a comparison between QuikSilver and Billabong. I'll study ZQK from its own fundamentals. This thread already has a lot of information, and I'll add new one as it becomes public.
I'll keep on holding ZQK, a bit of a positive reaction to the short term support today:
I'm listening to ZQK's "ICR XChange Conference" but I'm not really thinking about ZQK ... I'm thinking of ONSM, because they're showing slides and films at the presentation, and all I can do is hear the sound !
They should make it all using video on the web, not just a webcast. Anyway, let's leave ONSM for its thread.
ZQK didn't do much today and I have nothing new to add to the fundamental picture. I'll continue holding ZQK.
Nothing new on ZQK today, I'm running late on these updates today, I'll just say I'll continue holding and leave the updated chart:
QUIKSILVER INC Files SEC form 10-K, Annual Report
http://biz.yahoo.com/e/070112/zqk10-k.html (http://biz.yahoo.com/e/070112/zqk10-k.html)
Quote from: Se7en on January 12, 2007, 06:46:15 AM
QUIKSILVER INC Files SEC form 10-K, Annual Report
http://biz.yahoo.com/e/070112/zqk10-k.html (http://biz.yahoo.com/e/070112/zqk10-k.html)
Yes, we'll study the 10-K in detail over the upcoming updates, thanks Se7en :)
I think it is interesting to show the product mix they're selling at Quiksilver:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=31690;image)
I think wintersports and golf will be two of the fastest growing sports in the world for the next 10 years, so I'm glad to see wintersports now accounts for 18% of ZQK's revenues (being the largest component) and golf equipment represents 7% of total sales.
Technically the stock may retest the 50 days moving average at $14.81 or it may bounce right away, because volume picked up considerably on Friday and the stock ended with a doji candle, which shows indecision and perhaps a change in the short term trend. The stock has been consolidating for about a month, it is getting ready for a push to new highs above $16.
Gee, I'm glad I wasn't around to see ZQK down 6.5% on the day ???
I'm glad it recovered towards the end of the session, leaving quite a bullish candlestick on the chart. The gap between $14.58 and $14.87 was closed, the stock can and should move up now.
I'll keep on holding ZQK.
My short term timing on ZQK was poor, but the overall trend remains bullish and fundamentals look sound, as you can read on the rest of this thread. I'll keep holding ZQK.
Quote from: David Randolph on January 05, 2007, 05:30:09 AM
ZQK recovered some ground yesterday. This is a great stock to own for the long term, but it isn't a fast mover, we need to be patient with it. I'll be patient and keep on holding ZQK.
I have nothing to add to what I said on this previous update. Although ZQK is down some from my buying price, I'll be patient with it, as I expect it to rise between 25 and 35% a year going forward.
Nothing new on ZQK, I'll hold.
There was a news release yesterday:
• Quiksilver and Plantronics Announce Partnership and New Limited Edition Sports Collection (http://biz.yahoo.com/prnews/070122/sfm031.html?.v=73)
PR Newswire (Mon 11:00am)
Positive but irrelevant news in share price terms. The stock is touching some horizontal supports now. I consider it cheap with an estimated 2007 earnings multiple of 12.7. Quiksilver is also a business that I know well and see growing 30% a year going forward, as it has been happening for the last several years.
I'll HOLD ZQK.
There was this news out from ZQK:
• Quiksilver Inc. Hires New Head of Rossignol Apparel Business for Americas (http://biz.yahoo.com/bw/070123/20070123005384.html?.v=1)
Business Wire (Tue 8:00am)
QuikSilver has 9,200 employees, Jose Garcia is just one more (even though he's coming for the management level), so obviously this isn't a market moving news.
There was also this article that partially explains my bullishness on ZQK:
10:00am 01/23/07 Outlook for Winter Sports Industry Favors Steady Growth, Says Mercanti Report (http://www.marketwatch.com/news/story/outlook-winter-sports-industry-favors/story.aspx?guid=%7BDCE42CA1%2DCCD8%2D45C0%2DBEA8%2DC04DC9BC4609%7D&sid=4014&symb=) - BusinessWire
Besides this, my ZQK long term estimate sees 33% average annual growth for the next 10 years, the stock is trading with a forward earnings multiple of 13 and a price to sales ratio of just 0.76.
I'll keep holding ZQK.
ZQK is that mammoth stock that moves slowly and recently it has been somewhat weak, as I'm losing 9.75% on this trade.
Anyway, I see it's long term fundamental growth of 33% a year continuing, so I have no reason to sell. ZQK is already big enough not to depend on a few men's will (it has 9,200 employees, $1.79 M market cap), so that diminishes risk.
Also, the company has value added brands, like QuikSilver and Roxy, so, their products aren't commodities. Another plus for this company is their recent bet on winter sports (particularly snowboarding) and golf, as they acquired Rossignol, areas where I expect strong growth for the next 10 or 20 years.
I'll keep holding ZQK as a long term investment.
I don't think ZQK will go much lower than current levels. Perhaps it will establish a trading range between $13.8 and $16 for some time. But I don't see its fundamentals deteriorating, quite the contrary.
The lower prices are attracting buyers, as you can see by the increase in volume.
I'll keep holding ZQK.
Finally we had a bounce on ZQK, maybe when least expected from a technical standpoint. I'll keep holding ZQK.
It would be nice if ZQK were able to close back above that broken ascending trendline, but I'll take yesterday's 0.63% bounce with a smile.
Perhaps ZQK will spend some time on a lateral trend between $13.8 and $16, before breaking out to new all time highs. I'll give it time and will keep holding the stock.
There was a press release out yesterday from QuikSilver, but it isn't relevant in terms of share price:
• Quiksilver, Inc. Athletes Perform at High Level at 2007 Winter X Games XI (http://biz.yahoo.com/bw/070130/20070130005456.html?.v=1)
Business Wire (Tue 8:00am)
The stock closed unchanged on low volume, I'll continue holding.
ZQK is now trading at a forward earnings multiple of $14.21/$1.12 = 12.7, and the industry average is 21.5, so I find the current share price weakness odd.
Volume picked up considerably yesterday. I think ZQK will bottom here around $14 and will make a bullish move towards the higher end of its trading range, around $16. At least that.
I'll continue holding ZQK.
18 analysts are expecting EPS of $0.09 on $550 M revenues in fiscal Q1 2007 (ends in January 07). This is a seasonally weak quarter. But I'm not sure it will be that weak, I think there's room for a positive surprise, because fiscal Q4 2006 was so strong (the highest quarterly revenue number in the company's history), that there can be some sales momentum carried through fiscal Q1 07.
As you can read from this thread, ZQK has been growing around 30% a year for the past 10 years, and I expect that trend to continue for 10 more years. Moreover, the stock is trading at an attractive forward earnings multiple of 12.7.
I'll continue holding ZQK, despite some short term weakness in the share price.
Volume on ZQK's shares is increasing and that tells me bulls are being attracted by these relatively low prices. Valuation is quite compelling, at 12.7 times 2007 estimated earnings, for a company that has been growing 30% a year for the past 10 years.
The small doji on Friday can be the beginning of a bull leg towards the high end of its trading range, which is $16. Time will tell, but I'll continue holding ZQK.
Finally a positive reaction from ZQK, rising 1.41% on yesterday's down market. I'll keep holding the stock.
Another advance day for ZQK without any news. I expect it to approach the upper end of its trading range, around $16 a share, and probably breakout above that level throughout the course of 2007.
I'll continue holding ZQK.
ZQK is slowly, but surely, coming back up towards the upper end of its lateral channel, around $16. I'm losing just 6.88% now, lets see if this Main (http://www.3stocksonfire.org/3stocksonfire.php) holding turns green sometime soon. That's my expectation.
Warm winter will bite $0.16/share off ZQK's 07 earning ... >:(
Aftermarket news:
Quiksilver Inc. shares fell $1.52, or 10.4 percent, to $13 in the late session after giving up 10 cents to $14.52 on the New York Stock Exchange, when the company cut its 2007 outlook.
Quote from: realcoolhead on February 08, 2007, 05:17:25 PM
Warm winter will bite $0.16/share off ZQK's 07 earning ... >:(
Quote from: capricho on February 08, 2007, 10:33:35 PM
Aftermarket news:
Quiksilver Inc. shares fell $1.52, or 10.4 percent, to $13 in the late session after giving up 10 cents to $14.52 on the New York Stock Exchange, when the company cut its 2007 outlook.
• Quiksilver Inc. Revises Guidance (http://biz.yahoo.com/bw/070208/20070208006021.html?.v=1)
Business Wire (Thu 4:00pm)
This was a shocker ???
Now ZQK is expecting EPS for the full fiscal 2007 to come in between $0.75 - $0.78. This puts forward earnings multiple at $13/$0.765 = 17 (I'm already considering the after hours close).
Of course, a speculator must be prepared for this type of occasion, this is why I only invest 6.66% of capital in each stock, to diversify risk. This way the 10.54% decline in after hours trading in ZQK shares will shave about 0.6% of the Main (http://www.3stocksonfire.org/3stocksonfire.php)'s total value. Bad, but not dramatic.
But I have to say I wasn't smart playing this stock. I was somewhat blind to what the market was telling me. You see, the July - September quarter numbers were so powerful that the stock shouldn't have gone down after they were released, it should have gained 20 or 30% over the next three or four months.
But no, it went down, it broke down below an ascending trendline, and I kept focusing on the long term fundamental trends instead of hearing what the market was telling me.
This trade will give me a precious lesson, for which I'll pay the appropriate price.
The lesson is:
- Historical fundamental trends are important, but they can change, and the market usually anticipates that change, by being weak while great news are being released. In that case, I should listen and respect the market.The price to pay for the lesson is:
- A 17-20% loss on this trade as I'll sell the stock at the open.
I don't think I should continue holding it due to three main reasons:
1) The forward earnings multiple is 17, that's not cheap, and fundamental trends are deteriorating (yeah, blame it on the weather). The stock can go down to a 10 times earnings multiple, that is, below $8 a share.
2) The lesson learned is valuable and I want to keep it in mind going forward. The price paid will work as a reminder.
3) I don't like pain. I cut the losses and let the profits run.
Therefore, the trading plan is SELL ZQK.
David,
Do you choose a market order in these cases?
Amarens
Quote from: Amarens on February 09, 2007, 09:24:28 AM
David,
Do you choose a market order in these cases?
Amarens
Yes, who cares about a few ticks? When I want to buy, I buy, when I want to sell, I sell.
Thanks for the quick respons. That's what I did but don't always know. Don't dare to at Otcb, got screwed to often.
Bummer trade, but hey is all in the game ;)
Amarens
Quote
• Quiksilver Inc. Revises Guidance (http://biz.yahoo.com/bw/070208/20070208006021.html?.v=1)
Business Wire (Thu 4:00pm)
This was a shocker ???
Now ZQK is expecting EPS for the full fiscal 2007 to come in between $0.75 - $0.78. This puts forward earnings multiple at $13/$0.765 = 17 (I'm already considering the after hours close).
Actual results came in much worse than this lowered guidance:
• Quiksilver, Inc. Reports 2007 Fourth Quarter and Full Year Results (http://biz.yahoo.com/bw/071213/20071213006022.html?.v=1)
Business Wire (Thu, Dec 13)
UPDATE 2-Quiksilver 2008 view below Street, shares fall (http://www.reuters.com/article/marketsNews/idUKN1325524820071213?rpc=44)
Thu Dec 13, 2007 5:55pm EST
«The bad news gave fuel to Quiksilver nay-sayers who have contended the 2005 purchase of French ski company Rossignol exposed the apparel maker to the vicissitudes of weather-related risk that are a part of the winter sports business.»
«For fiscal 2008, the company expects earnings per share of approximately 70 cents on revenues of $2.7 billion.»
I would say that at $7, that is, a forward p/e of 10, ZQK would look attractive, but I'm not all that confident, since the company already disappointed investors by a wide margin in 2007. 15% of ZQK's sales are related to winter sports like ski and snowboarding, and if you believe Al Gore ... the snow is melting :'(
QuickSilver is a great company and trademark, but after what Peter Lynch would call "diworseification" it can only reemerge as a turnaround play and for ZQK to be a strong turnaround candidate it needs to go down some more ... I feel the pain is not over yet, I'll let them bleed some more before considering this one.
ZQK recovered nicely from that low around $6. At that price it was trading at 8.6 times the $0.7 EPS estimate for 2009, so relatively cheap.
Yesterday it closed at $10.37, or 14.8 times the 2009 EPS guidance. Not particularly attractive, unless something changes on the fundamentals.