3SOF

Quote from: kpunarc on May 17, 2007, 11:14:50 AM
What do you think about  HAYN?

Technically the short, medium and long term trends are bullish:



In fundamental terms I'll study it in light of my new valuation model:

1) Dilution factor

I see that the share count rose 1.65 million recently, partially due to a public offering the company priced in March 19. The company used the proceeds to pay down debt. The balance sheet shows a current ratio of 4.31, which is healthy, but inventories account for 68.5% of total current assets. I'm going to attach a 5% dilution factor to HAYN.

2) Revenue CAGR

Historical average annual revenue growth has been 30%. I'll insert 1.3 as the revenue CAGR estimate on the valuation model.

3) Estimated net profit margin

The average net profit margin over the last 4 quarters was 10.5%. I'll consider this as my net profit margin estimate

4) EPS multiple estimate

The Steel & Iron industry trades at 12.44 times earnings. I believe it is reasonable to expect HAYN to trade at its industry average valuation over the medium term, so I'll use 12.44 as my EPS multiple estimate.

The valuation model results are:



Given the above estimates I expect HAYN to rise about 5% a year for the next three years, so the stock doesn't seem to be an interesting investment. But thanks for the suggestion, good luck if you own it !

I didn't like HAYN at $89, but maybe it's cheap now at $55. Analysts expect the company to earn $6.65 per share in 2008, so HAYN's forward earnings multiple is 8.4, while the Steel & Iron industry now trades at 15.3 times earnings.

But this is a simplistic fundamental analysis.

From a technical standpoint the stock is "kind of boring".