Analysis on Demand

[terainvestment]

Hi David,

thank you for your great analysis: can you check IOM if you have time?

Thanks,

A.

[ygtrdr]

Morning David, or in your case, good afternoon!

FSTR please.

thanks.

[BigSully1]

Morning David, or in your case, good afternoon!

FSTR please.

thanks.

FSTR - good one. I'm holding some.

[Jim897]

SIMC - trading at a forward P/E of about 8 and a P/S of less than 0.5.

[David Randolph]

DUK,if you please. No hurry,i'm in this long term.

1. Profile

Duke Energy Corporation (DUK), together with its subsidiaries, engages in the natural gas and electric businesses in the Americas. The company operates in six divisions: Franchised Electric, Natural Gas Transmission, Field Services, Duke Energy North America (DENA), International Energy, and Crescent Resources. The Franchised Electric division generates, transmits, distributes, and sells electricity in central and western North Carolina and western South Carolina. The Natural Gas Transmission division provides transportation and storage of natural gas in the eastern and southeastern United States, and in Ontario and British Columbia, Canada. This division also provides natural gas sales and distribution service to retail customers in Ontario; natural gas gathering and processing services to customers in western Canada; and other energy-related services. The Field Services division gathers, compresses, treats, processes, transports, markets, and stores natural gas; and fractionates, transports, markets, and stores natural gas liquids. The DENA division operates and manages power plants, and markets electric power and natural gas in the United States and Canada. The International Energy division operates and manages power generation facilities, and sells and markets electric power and natural gas. The Crescent Resources division develops and manages commercial, residential, and multifamily real estate projects primarily in the southeastern and southwestern United States. In addition, Duke Energy owns and operates a fiber optic communications network in the Carolinas serving wireless, local, and long distance communications companies; Internet service providers; and other businesses and organizations. The company also provides insurance and reinsurance of various business risks and losses. Duke Energy was founded 1916 and is headquartered in Charlotte, North Carolina.

2. Stock Price History



Thinking of the main movements and major events, I identify four phases for DUK:

1) The long term bull market, from 1980 (that's how far my Metastock database goes, but I think the company's debut in the market was prior to 1980) until April 2001, when the stock peaked at $47.7.

My fundamental data only goes back to 1994, but I can see justification for the bull run until 2001. Revenue in 1994 was $4.49 B and in 2001 it was $59.5 B. EPS grew a lot less than revenue, going up from $1.13 in 94 to $2.44 in 2001.

2) Then, on phase marked with a 2 on the chart above, the stock went through a bear trend, which took it down 74% to a low of $12.21 in March 2003. Revenue also fell 62% in the period to $22.5 B and EPS turned to a negative ($1.30).

3) Phase 3 is a recovery phase, with DUK climbing 182% to a December 2006 high of $34.5. EPS was $1.54 in 2004, $1.88 in 2005 and $1.57 in 06.

4) The point marked with a 4 on the chart is related to the following spin-off:

«On January 2, 2007, Duke Energy completed the spin-off of its natural gas businesses (Spectra Energy Corp. (Spectra Energy)), including its wholly-owned subsidiary Spectra Energy Capital, LLC (Spectra Energy Capital, formerly Duke Capital LLC), and Duke Energy's 50% interest in DCP Midstream, LLC (DCP Midstream, formerly Duke Energy Field Services, LLC), to shareholders.»

3. Short Term Chart



Since the spin-off the stock has been stuck in a trading range between $16.97 and $21.3.

Here are analysts' expectations for DUK:



$1.16 EPS in 2007 means the stock is trading at 16 times earnings, which is roughly in line with the general market average.

DUK is a $23.5 B market cap company, so it is already a giant ... a giant that isn't growing, at least not over the last few years. Let's check my best effort in terms of estimates in my valuation model.

4. Fundamental Analysis



As you probably already know, the yellow lines are known facts, the dark yellow lines are calculated automatically by excel and the white lines are my four working estimates. So let's see why I have the values you see in the white lines.

1) Dilution Factor

1.06 means I expect the share count to increase 6% a year, on average. That has been the average over the past 10 years.

2) Revenue CAGR

Revenue in 2006 was $15.18 B. As you can see on the table above, analysts are expecting just $12.77 B in 07 and $13.29 B in 2008. I think I'm being somewhat optimistic thinking revenues in 2009 will be about the same as they were in 2006, considering analysts projections, but let's leave it this way.

3) Net Profit Margin estimate

I think net profit margin will be basically the same it was in 2006, around 13%. This is already high for an electric utility company, so I don't expect it to expand (also because I expect revenues to be about the same as they were in 06).

4) EPS multiple estimate

Here I've used the electric utilities average P/E ratio for my estimate. 

5. Conclusion

The valuation model says that if estimates are met, DUK will rise 13.3% a year, on average,  between now and early 2010 and that's considered not attractive, since I look for at least 16% share price CAGR.

DUK is already a $23.5 B mammoth. Unless it's going to be GE, I don't see what's the point of investing in it, unless you're a mutual fund running billions of dollars looking for relative safety and plenty of liquidity. 

But this was just a brief analysis, I may have missed several important aspects of this company. Good luck soxguy

I'm still going to write about SHSN today, on visualjourney's request.

[David Randolph]

SHSN

1. Profile

Shearson Financial Network, Inc. (SHSN.OB) operates as a direct-to-consumer mortgage broker and banker in the United States. It originates mortgage loans and home equity loans. The company's products include Conforming Mortgage products, which are adjustable and fixed rate loan programs; Alt A Mortgage products for institutional investors; Second Mortgage Program, a fixed rate amortizing and fixed rate with a balloon payment programs; JUMBO Loans, a adjustable and fixed rate loan program for loans that exceed the loan limits set by the FNMA and the FHLMC; and Non-Conforming loans, which are fixed rate first mortgage loans that are amortized over a fifteen or thirty-year period. As of December 31, 2006, Shearson Financial Network had 13 retail branches licensed in 33 states. The company was founded in 2000. It was formerly known as Blue Star Coffee, Inc. and changed its name to Consumer Direct of America in 2002. Further, it changed its name to Shearson Financial Network, Inc. in 2006. Shearson Financial Network is based in Henderson, Nevada.

2. Stock Price History



You're a little devil visualjourney, asking me to write about SHSN.OB, which is not only an OTCBB traded stock, but directly involved in the high risk mortgage sector

But of course, I welcome your request, this can be interesting.

Well, looking at the chart, it is a normal penny stock chart which suggests there was plenty of dilution over the years, which of course is a situation I dislike. Unfortunately my source for the historical share count doesn't have OTCBB stocks in its database, so I have to open a few 10-Q to know about the share count evolution.

Ok, on September 30, 2005, the company had 36,960,650 shares of common stock outstanding. Wow, on April 7, 2006, it had 96,198,027 shares. And even more WOW, on the latest count, June 30, 2007, they had 765,942,337 shares outstanding.

I think this analysis may very well stop here. I can see management has absolutely no respect for shareholders and common shares are a worthless piece of paper for them. Whatever value common shares have, they'll take it. Whatever positive news that may be release have just one purpose: to attract potential investors to sell some more shares.

And this stuff is still worth 765,942,337*$0.14 = $107 M.

No way.

3. Conclusion

Even though SHSN.OB is down 99% from its highs I see it going down another 99%. The recommendation for the stock is avoid.

[n1notesguy]

Hi David,

Do you think you could perhaps revisit ASTI.

Thank you,

Ken

[David Randolph]

Hi David,

Do you think you could perhaps revisit ASTI.

Thank you,

Ken

Yeah, sure, I should have never sold it and may very well buy it back a lot higher, perhaps tomorrow. The $11 warrants issue is behind us, so probably there are more 6 million shares or so. This puts the market cap in the $220 M or so range (I'll make more exact calculus tomorrow).

But, with Norsdk Hydro's help, a $52 B market cap company, I see ASTI's products in the new buildings of the future. If those Chinese solar companies, like JASO and TSL, can have a $1.5 B market cap selling just traditional solar panels, I wonder how much a true innovator in the space like ASTI can be worth?

If I buy and recommend it, I won't sell it for at least three years. From now on there won't be more weak hands. Just in ASTI the cost of having weak hands was 100%. I've had enough of that.

[Jim897]

David,

Please at least take a look at SIMC sometime soon.  It has been rising rapidly lately and will probably continue to do so for a while.  As I said earlier:

trading at a forward P/E of about 8 and a P/S of less than 0.5.

[David Randolph]

David,

Please at least take a look at SIMC sometime soon.  It has been rising rapidly lately and will probably continue to do so for a while.  As I said earlier:

trading at a forward P/E of about 8 and a P/S of less than 0.5.

Looks cool, awesome bull run lately, congrats Jim897

Fundamental trends are also very powerful, but I wonder where did you get the forward P/E of about 8? I see the company earned $0.21 over the latest quarter, which was a lot higher than in  previous quarters. If we multiply this by 4 quarters we get $0.84. Since the stock is trading at $12.21, the "natural" P/E is about  14.5, which is still cheap. Do you think there's going to be more strong growth? Backlog was up just 8% from the year ago level.

At first sight I would say SIMC has perhaps more 30% to go before being fairly valued. I wish I had seen it earlier though, it was obvious from the fundamental change that the stock would head a lot higher over the short term.

Give me a hand Jim, why do you call for $12.21/8 = $1.52 EPS over the next twelve months? Thanks

[BigSully1]

David,

Please at least take a look at SIMC sometime soon.  It has been rising rapidly lately and will probably continue to do so for a while.  As I said earlier:

trading at a forward P/E of about 8 and a P/S of less than 0.5.

Looks cool, awesome bull run lately, congrats Jim897

Fundamental trends are also very powerful, but I wonder where did you get the forward P/E of about 8? I see the company earned $0.21 over the latest quarter, which was a lot higher than in  previous quarters. If we multiply this by 4 quarters we get $0.84. Since the stock is trading at $12.21, the "natural" P/E is about  14.5, which is still cheap. Do you think there's going to be more strong growth? Backlog was up just 8% from the year ago level.

At first sight I would say SIMC has perhaps more 30% to go before being fairly valued. I wish I had seen it earlier though, it was obvious from the fundamental change that the stock would head a lot higher over the short term.

Give me a hand Jim, why do you call for $12.21/8 = $1.52 EPS over the next twelve months? Thanks

David, I might be mistaken but I'm pretty sure you looked at SIMC several months ago per somebody's request, and acknowledged that the stock was very undervalued, but it was too illiquid for you too buy for some reason?

[David Randolph]

David, I might be mistaken but I'm pretty sure you looked at SIMC several months ago per somebody's request, and acknowledged that the stock was very undervalued, but it was too illiquid for you too buy for some reason?

I don't remember, but it is probable. It goes to highlight the fact that technical aspects are irrelevant and shouldn't be considered on anyone's analysis. I've been learning to trust fundamental analysis more and forget the chart.

I know you once wrote you didn't like the 3 Stocks Premium service anymore because you were interested more in learning technical analysis and I was getting too fundamental and long term oriented. But of course, I don't do my job to please everybody, I do it the way I think is the best to achieve an above average performance in a scalable and sustainable way. By scalable I mean it can be done as well with $50 K as with $50 M. It has been an evolving process.

But I'm glad you're still here and welcome your support and always constructive criticism

[Jim897]

David, I'm clearly not correct at these levels. I said that when the stock was trading below 10.  I don't have the data at my fingertips, but I've seen it said that eps for 2007 is likely to be .90 - .95.  I don't know estimates beyond that.

[BigSully1]

I know you once wrote you didn't like the 3 Stocks Premium service anymore because you were interested more in learning technical analysis and I was getting too fundamental and long term oriented. But of course, I don't do my job to please everybody, I do it the way I think is the best to achieve an above average performance in a scalable and sustainable way. By scalable I mean it can be done as well with $50 K as with $50 M. It has been an evolving process.

But I'm glad you're still here and welcome your support and always constructive criticism
[/quote]

There's nothing wrong with being fundamental and LT oriented, if thats what you really are. I just have a great deal of trouble understanding what you are all about now and WHAT you are evolving into, whatwith the turnover and of  many stocks at inopportune times?

I will be here until either you boot me off or if the number of quality member/contributors keep declining. No you can't please everyone, but I will give you no more criticism, it is after all YOUR site.

[n1notesguy]

Hi David,

Do you think you could perhaps revisit ASTI.

Thank you,

Ken

Yeah, sure, I should have never sold it and may very well buy it back a lot higher, perhaps tomorrow. The $11 warrants issue is behind us, so probably there are more 6 million shares or so. This puts the market cap in the $220 M or so range (I'll make more exact calculus tomorrow).

But, with Norsdk Hydro's help, a $52 B market cap company, I see ASTI's products in the new buildings of the future. If those Chinese solar companies, like JASO and TSL, can have a $1.5 B market cap selling just traditional solar panels, I wonder how much a true innovator in the space like ASTI can be worth?

If I buy and recommend it, I won't sell it for at least three years. From now on there won't be more weak hands. Just in ASTI the cost of having weak hands was 100%. I've had enough of that.

Thank you David. I thought it was a great pick the first time around. I did sell 1/2 my shares at that time. I was considering purchasing them back after it pulls back from this run.

Ken