Analysis on Demand

[Jim897]

The sticker for ABAT tomorrow will be GBT.

[spiritgate]

I've made a good amount of money in the past month with YGE and wonder what you think of it.

[Garoh]

David look at this good stock  CHL  it's a chines company ...

[David Randolph]

Hi David don't post here too often but always checking for stocks... Great job on your analysis, if you could can you do an analysis on CREE ? thanks

1. Profile

Cree, Inc. (CREE) develops and manufactures semiconductor materials and devices primarily based on silicon carbide (SiC), gallium nitride (GaN), and related compounds. The company produces light emitting diodes (LEDs), SiC and GaN material products, and high-power products using its SiC and GaN materials. Its LED chip products include blue and green devices made from GaN and related materials grown on SiC substrates. These LEDs are electronic components that are used in various applications, including backlighting for mobile products, automotive interior lighting, electronic displays, gaming equipment, consumer products, and other electronic equipment. Cree's high brightness packaged LEDs comprise high brightness LEDs for lighting applications and surface mount devices; and through-hole LEDs for signage, gaming, and other applications. The company's materials products consist of SiC and GaN wafer and epitaxy products, which are used to manufacture products for optoelectronic, microwave, and power switching applications, as well as bulk SiC materials used for gemstone applications. Its high-power products comprise SiC power devices, which are used in power conditioning and power switching in power supplies and motor control applications; and RF and microwave devices. Further, Cree provides foundry services for wide bandgap monolithic microwave integrated circuits that are used in various wide bandwidth communications applications, high-power radar amplifiers, electronic warfare, and wireless infrastructure. The company markets its LED products to customers who incorporate them into packaged lamps for resale to original equipment manufacturers and in packaged products; and SiC and GaN materials products to corporate, government, and university research laboratories. It sells its products primarily in Japan, Malaysia, Hong Kong, Korea, Taiwan, Europe, China, and the United States. The company was founded in 1987 and is headquartered in Durham, North Carolina.

2. Stock's History



CREE's IPO happened in February 1993 at a split adjusted price of $1.25. With the stock closing at $29.46 yesterday, the average annual return of this investment was 23.5%, which is attractive.

However, of course, at the technology bubble's peak in 2000 the average annual return was a lot higher, let me see just for curiosity, it was 73% Clearly, there was a time to sell this stock ... what Warren Buffet is doing with his PetroChina stake also tells me that when stocks enter the "bubble land" and decouple a lot from the fundamentals, it is better to take the profit. There's a time to buy and sell stocks, only a very limited number of stocks rises steadily for 30 years or more without getting a bubble-like valuation in the process. Coca-cola is one of those rare examples.

Going back to CREE, I see the share count rose 6.34% a year, on average, since 1998, and rose 10.4% so far in 2007. This will matter for the dilution factor in my valuation model.

The current market cap is $2.5 B, so, we're not going to discover anything new here, this is a medium cap stock widely followed by analysts (twelve are providing estimates for it).

As for the revenue trend:



The trend has been ascending over the years, with two declines in 2002 and fiscal 2007 which ended in June 2007. But analysts are expecting a return to growth in fiscal 2008 and 2009. The last five years revenue CAGR was 20.5% and the Price to Sales Ratio (using 2007 number) is 6.34, which seems high, since the company's industry has an average sales multiple of 1.68.

As for EPS, the evolution was:



EPS declined for three years in a row, from $1.18 in 2005, to $0.98 in 2006 and $0.72 in 2007. For 2008 analysts expect a further decline to $0.39 and then a recovery in 2009 to $0.55.

This means that CREE is trading at a 2008 estimated EPS multiple of $29.46/$0.39 = 75.5, which is extremely high. The Semiconductor Equipment & Materials industry trades at 20 times earnings.

3. Conclusion

According to the most widely used valuation metrics CREE seems very overvalued. I would avoid the stock, because even if there are positive fundamental surprises, that's already priced in by the lofty valuation.

[mbaugh]

David, when you get a chance check out SEED

its a china company that was recently mentioned in Forbes as one of the best under a billion dollar companies.  They have 23 million shares outstanding and are buying back their shares.  Also they are expected to do over $100 million in revenues in 2008.

Thanks 

[BigSully1]

David, when you get a chance check out SEED

its a china company that was recently mentioned in Forbes as one of the best under a billion dollar companies.  They have 23 million shares outstanding and are buying back their shares.  Also they are expected to do over $100 million in revenues in 2008.

Thanks 

Should be worth a look. Up 45% today.

[BigSully1]

David, when you get a chance check out SEED

its a china company that was recently mentioned in Forbes as one of the best under a billion dollar companies.  They have 23 million shares outstanding and are buying back their shares.  Also they are expected to do over $100 million in revenues in 2008.

Thanks 

Should be worth a look. Up 45% today.

I went ahead and bought a little, got my feet in the door, even though it already had a 45% runup. At least I looked just a little before buying this time. Should be a great sector to be in, after all, these emerging countries have to have a way to feed all those people without relying so heavily on imports. Now I need to take a closer look. Ag baby!

[BigSully1]

SEED still trading heavily in A.M. Up a whopping 83% today if including A.M. Nice Mbaugh, and thanks.

[mbaugh]

SEED still trading heavily in A.M. Up a whopping 83% today if including A.M. Nice Mbaugh, and thanks.

No Problem BigSully, I'm glad you were able to get in early.  We're all Family here at 3stocksonfire, so it feels good to help the family out.

By the way David, Excellent Job on the portfolio!!!! 

Good night!
Mbaugh

[stocky]

Great job David. I am sure 3SoF will be soon featured in Forbes. We need 3SoF IPO [preferrably filed from China], and we all will be onboard. Or atleast for 83% in first day. 

[BigSully1]

David, when you get a chance check out SEED

its a china company that was recently mentioned in Forbes as one of the best under a billion dollar companies.  They have 23 million shares outstanding and are buying back their shares.  Also they are expected to do over $100 million in revenues in 2008.

Thanks 

Should be worth a look. Up 45% today.

I went ahead and bought a little, got my feet in the door, even though it already had a 45% runup. At least I looked just a little before buying this time. Should be a great sector to be in, after all, these emerging countries have to have a way to feed all those people without relying so heavily on imports. Now I need to take a closer look. Ag baby!

I really do believe that the ag/feed/food sector in China is a great place to be. I already talked about the severe shortage of pork driving prices, and large contract between China and Smithfield foods as just one of the reasons I bought SDA - the largest Brazilian meat producer, on the member boards. I don't think anyone really paid attention though 

SEED still trading heavily in A.M. Up a whopping 83% today if including A.M. Nice Mbaugh, and thanks.

No Problem BigSully, I'm glad you were able to get in early.  We're all Family here at 3stocksonfire, so it feels good to help the family out.

By the way David, Excellent Job on the portfolio!!!! 

Good night!
Mbaugh

Yes Mbaugh, I like to think of us a family or team, collectively helping each other. I like your attitude and applaud (again)

Now about SEED, I think it does have excellent potential. I'm not buying more (just yet), but I'm not selling what I already have either. Thanks again.

I think David's new thread right on the the Main Board at the forefront is a very good idea. Good and honest new ideas can be brought forth without trying to distinguish between the "pumps/dumps" of the free boards. After all, we are a "family" right?

[jorgegr]

I really do believe that the ag/feed/food sector in China is a great place to be. I already talked about the severe shortage of pork driving prices, and large contract between China and Smithfield foods as just one of the reasons I bought SDA - the largest Brazilian meat producer, on the member boards. I don't think anyone really paid attention though   

I've been invested in SDA for long term since last Feb and also holding for
almost a year in:

FXI - several chinese companies.
ACH - Trading it frequently for the last two years (nice Aluminum/China combo)
           as I wrote in the corresponding thread
YCZ -    EWZ   -   BG (soy traders + other agric commodities & investors in biofuel)

Cheers & good picking.

Jorgegr

[mbaugh]

Can someone help me out on SEED.  On MSN money it says SEED EPS for 9-30-07 was over $3.  Am I reading this right.  The balance sheet looks great in terms of growing revenues.   I'm trying to determine what the actual EPS and forward P/E is?  I appreciate all the help I can get.

Mbaugh

http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=SEED&lstStatement=Income&stmtView=Ann

[spiritgate]

YGE!

[BigSully1]

Can someone help me out on SEED.  On MSN money it says SEED EPS for 9-30-07 was over $3.  Am I reading this right.  The balance sheet looks great in terms of growing revenues.   I'm trying to determine what the actual EPS and forward P/E is?  I appreciate all the help I can get.

Mbaugh

http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=SEED&lstStatement=Income&stmtView=Ann

No Mbaugh. You're looking at EPS for the 9 months ended 9/30/06. MSN shows eps for last Q at 1.59/1.50 basic/diluted and the previous Q -1.34/-1.34. If you combine the 2 Q's, you have .25/.16 for the 2Q's. I think this is this screen you want to look at.

http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=SEED&lstStatement=Income&stmtView=Qtr

It's hard to extrapolate an actual current P.E. at this time, or for that matter even a forward P.E.  I haven't had time to really delve into it yet, there's alot to study here, and likely won't have time for several weeks with earnings season starting in earnest now and several other matters I need to attend to.

I only bought enough to get me interested. But without more study, I won't be buying more yet and would only rate it speculative with very good potential. You're doing the right thing studying beforehand.

I guess you  know that the single analyst slashed EPS estimates for both 2007 and 2008 after last ER? That doesn't deter me from being highly interested here though.

I like the institutional support with some quality names. Royce seems to be in many of the best holdings that I'm in. Galleon is a hedge fund run by an Indian guy, can't remember his name, something like Saj?, known for it's very high performance and also a mutual holder with some of my other holdings. This is  NOT a good reason to buy though, nor is the Forbes endorsement.