3SOF

nice analysis David. appalud
Question.... current ratio would decrease if the company buys its own shares?

Quote from: njshiva on January 09, 2007, 07:55:42 AM
nice analysis David. appalud
Question.... current ratio would decrease if the company buys its own shares?

That's a good question njshiva.

Let's see. The current ratio is the ratio between current assets and current liabilities. For a company to buy back shares, it either uses cash or debt. The shares bought are held as "Treasury Stock", but I'm not sure if that is a current asset or not.

I'm going for lunch now (it's 1 pm here), but when I get back I'll look in my Fundamental Analysis books to see if I can get a straight answer.

Thanks for the question, it will make me learn something

Quote from: njshiva on January 09, 2007, 07:55:42 AM
nice analysis David. appalud
Question.... current ratio would decrease if the company buys its own shares?

More than good, this question was terrific !

You're right, the current ratio would decrease because of a company buying back its own shares because the company would use current assets (like cash) to buy back shares (thus reducing the current ratio, which is current assets/current liabilities) and those shares are not considered current assets, not even assets, they're accounted on "Stockholder's Equity" on the balance sheet.

Thanks

I hope that I am not late for request.

OPBL

How about an analysis of ANGN

Quote from: David Randolph on January 09, 2007, 04:02:46 PM

Quote from: njshiva on January 09, 2007, 07:55:42 AM
nice analysis David. appalud
Question.... current ratio would decrease if the company buys its own shares?

More than good, this question was terrific !

You're right, the current ratio would decrease because of a company buying back its own shares because the company would use current assets (like cash) to buy back shares (thus reducing the current ratio, which is current assets/current liabilities) and those shares are not considered current assets, not even assets, they're accounted on "Stockholder's Equity" on the balance sheet.

Thanks

thanks david!!

I'm sorry for being late on these analysis on demand, I'll try to get back on track tomorrow.

I still need to make the analysis on PICO and PTT before I request more.

I really need to make things faster to be effective, because I'm being too slow in finding new attractive picks for the Stocks on Fire Portfolio. Also, of course I can't completely rely on you to bring the good picks, that's my job

I believe everything will be working very well over the next week, fortunately current holdings are doing their job well, since the Stocks on Fire Portfolio is already up 3.17% in 2007 and the S&P 500 is falling 0.24% over the same period

AKAM again, please.

1. Profile

Gateway (GTW) directly and indirectly sells desktop and notebook computers and servers, PC-related products and services that are enabled by or connect with PCs to third-party retailers, consumers, businesses, government agencies and educational institutions.

2. Technical Analysis
2.1. All History Chart



GTW completely collapsed from its 1999 highs of $84. Now trading at $2.25. That doesn't mean it will go higher, but it does mean it is trading on a relatively low point, despite being up 73% from its August lows.

2.2. Medium Term Chart



The stock is now above the 50 days and the 200 days moving averages and both those averages show a positive slope, something that didn't happen since  late 2004. The medium term trend is now bullish.

2.3. Short Term Chart



The short term trend is up and the whole technical picture will be quite bullish if GTW is able to close above $2.26. I don't know if this will happen today or not, but even if it doesn't, there's technical support from the 50 and 200 days moving averages, about 10% below the current share price.

This looks like an ascending triangle ready to breakout.

3. Fundamental Analysis
3.1. Number of Shares Outstanding & Market Cap



This is quite surprising. Given the all history chart, I expected to see heavy dilution over the years, but no, just 1.46% average annual increase in the share count, since the company's IPO in 1993. The market cap went down 5.14% a year, on average, since the IPO.

The current market cap is 371,753,348*$2.25 = $836 M

3.2. Liquidity



Long term debt is $300 M, which doesn't look all that scary for a company selling $4 B a year. The current ratio is low, at 1.23, but, for example, DELL's current ratio is even lower, at 1.03, and I don't see anybody complaining about it.

3.3. Revenues + Gross Margin



Revenues declined by more than 50% since 2000, but the main problem with GTW is the declining gross margin. It has come off from 23% in 2000 to about 7% currently.

But the latest reported quarter, Q3 2006, showed gross margin ticking up by 2.3 percentage points to 8.3%, which can be significant:



3.4. Profits



Ok, this is too much for me, I can't buy this stock, at least, not with the current public information. The trailing earnings multiple for GTW is 56 and the forward multiple is 20.4. This will happen if the company is able to meet optimistic projections.

4. General Overview

I was interested in GTW because of the chart and the very low Price to Sales Ratio of 0.2, but going more in depth I see the stock looks fully valued, because gross margin has been declining over the years (showing the company isn't competitive enough), and the trailing and forward earnings multiple already reflect a future fundamental rebound, which will probably be slow.

This was meant to be a "buy" analysis, but I'm going to cancel it and continue looking for new attractive picks for the Stocks on Fire Portfolio, which deserves only the best

1. Introduction

Guitarman requested an analysis on PICO and sent me a research piece from other service which you can find attached below.

I read the research on PICO, which was interesting, making a general assessment of PICO's market potential and perspectives. But it was too general for me, I want to go deep into the financials of the stock.

So, I'll apply my own method of analyzing stocks without paying much attention for other's analysis, I believe that's what guitarman wanted when he requested the analysis.

2. Profile

PICO Holdings, Inc. (PICO) and its subsidiaries operate as a diversified holding company. It operates through three segments: Water Resource and Water Storage, Real Estate, and HyperFeed. (complete profile here)

3. Technical Analysis
3.1. All History Chart



The all history chart shows PICO is enjoying a bull trend but still somewhat below the all time highs set in 1991 and 1993, around $56 a share.

3.2. Medium Term Chart



After a sustainable ascending trend in 04 and 05, PICO has been trading in a range between $29.46 and $36.21.

One really needs to be patient with this stock, it looks like a low risk/low reward kind of stock.

3.3. Short Term Chart



Over the short term PICO is approaching the highs of its medium term lateral channel. A technician would like to see it breakout above $36.21 before buying. Let's see what the fundamentals say about the stock.

4. Fundamental Analysis
4.1. Number of Shares Outstanding + Market Cap



These guys play a lot with the number of shares outstanding, and I see 14.6% average annual increase in the share count. So, although on the share price chart PICO is way below its 1991 levels, the market cap is now at an all time high, because market cap = share price*# shares outstanding.

So, the market cap has been rising 23% a year since 1994, but almost 15 percentage points of that yearly average rise is attributable to the increase in the share count. I dislike this.

The current market cap is $673 M.

4.2. Liquidity



PICO has a weird balance sheet, without any current assets or liabilities, just long term assets and liabilities, so, there's no current ratio (which is current assets/current liabilities).

What I have on the graph above is total non current liabilities, which have been going down over the years, to $133 M in 2006.

4.3. Revenues



On average, revenues declined 2% a year since 1994. And analysts (the one analyst mentioned on Yahoo covering the stock), is expecting revenue to decline to $73 M in full year 2006 (the company had revenues of $66 M for the first three quarters of the year) and to decline further to just $50 M in 2007.

That means the Price to Sales Ratio is about 9, which is way high.

Also, gross margin goes up and down a lot, it's impossible to make long term estimates on this company.

It is becoming clear this can only be an asset play.

4.4. Profits



Again, the same picture for EPS, going up and down a lot, but declining 8% on average since 1994.

The trailing earnings multiple is 31, but considering 07 estimates of just $0.24 EPS, the forward earnings multiple is 148

5. General Overview

Very directly, here's how I see it: I would never buy this stock, it can only be an asset play (as is explained on the pdf document below), but I'm no fan at all of asset plays.

It can only be an asset play because revenues and earnings numbers aren't reliable at all and the stock seems extremely expensive according to those ratios.

I can't value the company's assets, which are mainly land in the Nevada state.

This water shortage issue has been coming up a lot in TV and financial newspapers, but I think that can be way off. It can take more than our lifetime before there's any drinkable water shortage in the US.

So, my overall assessment is negative for PICO, but I don't have all the information necessary to value the company, so I can be wrong (I could be wrong even if I had it). If there's value here it is pretty much hidden, because I don't see it in the financial reports. Probably it is hidden not in papers, but in time, what I mean is, the value can be a future value, but nobody knows when that future will arrive, and I guess it can take decades.

Good luck for PICO's holders, although I hope there's plenty of drinkable water for everyone for years to come. Already people are developing ways and technology for turning the sea water into drinkable water, perhaps that will happen before there's any shortage.

Ah
Thanks David!
Sounds good to me.
I'll put my PICO $ to better use in one of your picks!
I like the way you think!
Best
GMan

AAPL please

ty

Hi David,

If you have the chance, KOPN please...

aapl
please

Hi guys

You know it takes me between 2 and 3 hours to write or record a full analysis on a stock (because I need to gather the information, make fundamental graphs by hand, read a lot, and so on).

But, when I'm reviewing stocks, I usually don't take more than 2 or 3 minutes to see if it is worth a more in depth study or not. I plan to make 3 minute videos from now on for these analysis on demand without any preparation, just to give you (and me), an initial take on the stock.

If the stock passes that first test, I'll go on to a more deeper analysis.

But I still need to perform the analysis on PTT with the old format, because that is what kslifka expected when he requested the analysis.

AAPL? Well, it's an incredible company, but already $82 B market cap. Sure, it can double or triple over the next 5 or 10 years. So, the best case scenario is you make about 11% average profit per year or so. Happy?

Unless one is investing with a multi billion dollar fund I find it hard to understand why people buy mega caps like AAPL (when they are already mega caps - when it was a $10 B market cap, hey, awesome pick). AAPL is so big already that it will probably grow just a bit above the market average.

Although I'm a long term bull on AAPL, as I am in the general market, I don't think I would be glad to join the crowd in buying now with all this iPhone frenzy. The stock's valuation already had that news embedded.

This analysis wasn't supposed to be made, not like this ... especially since other members, like realcoolhead for example, are asking for AKAM and others for more time.

But I guess you get the picture for AAPL, I don't see where's the profit potential or the fun in buying such a mega cap, but good luck