SLR

[Tirebldr]

SLR Closed yesterday in a bullish engulfing candlestick, and continuing to climb today. In at 3.91

[Tirebldr]

What do you guys think about this evaluation from http://www.halplotkin.com/cnbcs018.htm? There are several price charts on their site but I did not paste them into here. I'm attempting to learn from you all here and would really like to hear your opinion on a longterm hold please. And whether this evaluation is on the level. And how would I know when I read an eval such as this that I know it is as good as it says.

Thanks for your help
Art
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Solectron Shines in Outsourcing Sector
by Hal Plotkin
Silicon Valley Correspondent

Solectron Corp. {SLR}, a Milpitas, Calif., manufacturer of electronics products for blue-chip customers such as International Business Machines {IBM}, Hewlett-Packard Co. {HWP}, and Cisco Systems Inc. {CSCO}, is benefiting from strong sales by its customers and high utilization of its plants and equipment. The company's stock has more than tripled in price over the past 12 months.

Stock Chart
SLR 52-week stock price chart
SOLECTRON CORP (NYSE:SLR)
Analyst
Opinions         
Strong Buy    6
Buy    10
Hold    6
Sell    0
Strong Sell    0
   
Average
Recommendation
This Week    1.9
   


Earnings Per Share
Last Quarter    0.29
Surprise    0.00
Percent    0.00%


Consensus EPS     
This Year's    1.13
Next Year's    1.52

SOLECTRON CORP - SLR ranks 73 out of 99. It is in the Electronics/component-control industry.

Analyst Ratings compiled by Zacks

"Solectron picks the right companies to work with," says Shelby Fleck, a principal at Morgan Stanley Dean Witter in New York.

Fleck currently has an "outperform" rating on Solectron stock. "Investing in Solectron is like investing in a pool of the leading technology companies. It's the lead company in the rapidly growing outsourcing industry," she says. Fleck notes that, in terms of total sales, Solectron surpassed rival SCI Systems Inc. {SCI}, of Huntsville, Ala., over the past two quarters.

Stock Chart
SCI 52-week stock price chart

In addition, Solectron's huge cash hoard and brisk sales led BancBoston Robertson Stephens analyst J. Keith Dunne to upgrade the company's stock to "buy." The San Francisco-based analyst says Solectron's stock should trade at about $90 a share next year. Shares of Solectron changed hands recently at about $70.

"We believe the company's recent $1.1 billion equity offering increases its competitive advantage," Dunne wrote when he released his recommendation on Aug. 9. One week earlier, Merrill Lynch likewise raised its rating on Solectron to "strong buy."

Last month, Solectron sold an additional 15 million shares at $64.25 a share. The company plans to use the proceeds for working capital and to finance strategic acquisitions. Combined with a Liquid Yield Option Note, called a LYON, issued by the company recently, Solectron has raised about $1.7 billion in fresh capital in the past nine months. "They have an enormous war chest which will help them accelerate external growth opportunities," says Michael Zimm, senior equity analyst at CIBC World Markets in New York.

Analysts say Solectron is also benefiting from its December 1998 inclusion in the S&P 500. Being part of the S&P 500 puts Solectron in play at index funds that previously shunned the stock. In addition, the company's approximately $20 billion market capitalization now makes it an attractive candidate for non-index funds as well. "It created an up cycle," Zimm says. "Getting into the S&P 500 raised its market cap, and the higher market cap made it attractive to a lot more non-index funds," he says.

Zimm adds that he's a little embarrassed to have rated the company "hold" in his most recent recommendations. "That may not have been a very good call," he says. The recommendation, he says, is based on his concern that the stock, now trading at 45 times his estimated 2000 earnings, may have gotten slightly ahead of itself. Zimm bases his estimate on a projected compound annual earnings growth of 40% for Solectron.

"I'm not telling anyone to sell Solectron,' Zimm says. "It's the gold standard in the industry." But other companies in the sector, such as SCI Systems and St. Petersburg, Florida-based Jabil Circuit Inc. {JBL} look even more attractive to him right now.

Stock Chart
JBL 52-week stock price chart

"If you're a current Solectron holder you've got to hold onto it," Zimm says. "But if you have fresh money, you might want to take a look at other stocks in the sector."

Dunne, at BancBoston Robertson Stephens, sees the numbers a bit differently. In his report, he wrote: "At the current forward multiple, we estimate the stock should trade near the $90s over the next year, over 30 percent above the current level, based on our preliminary fiscal 2001 earnings-per-share estimate of $2.20 to $2.30."

The contract electronics manufacturing sector benefits from high plant utilization rates, one of the factors driving the outsourcing trend. Since CEM's manufacture products for many different companies, they can keep their factories humming away while a company making a single line of products might have to worry about stuffed distribution channels or other similar problems. "It would be a challenge for any [original equipment manufacturer] to keep up that kind of pace," Fleck says.

Most observers expect the trend toward electronics manufacturing outsourcing to continue well into the foreseeable future. Last week, for example, IBM announced it has chosen Solectron as the worldwide manufacturer of the printed circuit boards used in the company's line of PC servers. The deal extends over the next three years.

[Tirebldr]

Well Duh! I guess I could've started by looking at the date of the eval .  That said and done (with my head hanging between my legs), is there much future for SLR now?
Thanks

[eliteG]

I think there is a def future to SLR Tirebldr...I like the chart and I see some insiders buying so I am in. 

[David Randolph]

1. Introduction

I'm in the mood to check some low priced stocks with more than 1 million shares in average daily volume. SLR's chart looks attractive, so I'll make some tests to see if it presents a trading opportunity according to my strategy of picking and trading stocks. If you're new to 3 Stocks on Fire and would like to join our stock traders community, please register.

2. Profile

Solectron Corporation (SLR) is one of the world's largest providers of complete product lifecycle services. We offer product design and new product introduction, supply chain management, Lean manufacturing and aftermarket services such as product warranty repair and end-of-life support to leading customers worldwide. Solectron works with the world's premier providers of networking, telecommunications, computing, storage, consumer, automotive, industrial, medical, and aerospace and defense products. Our industry-leading Lean Six Sigma methodology (Solectron Production System(TM)) provides OEMs with quality, flexibility, innovation and cost benefits that improve competitive advantage. Based in Milpitas, Calif., Solectron operates in more than 20 countries on five continents and had sales from continuing operations of $10.6 billion in fiscal 2006. For more information, visit us at (www.solectron.com).

3. Technical Analysis
3.1. All History Chart



SLR is trading at the same share price it was 12 years ago, but I doubt it is trading at a market cap similar with 1994. Instead of share price charts, we should be studying market cap charts, because that's what really tells the value of a company, not the share price, right?

3.2. Medium Term Chart



The stock is trading near the lows of its 2003-2006 range. It declined in 04, 05 and 06. Is this price deterioration about to change?

3.3. Short Term Chart



SLR seems to have built an ascending triangle pattern. If it breaksout above $3.48 we get a short term technical buy signal, at least. The stock is at a crucial technical point. If it succeeds in crossing and closing above $3.48, that will make shorts cover and move money from the sidelines into the stock. If it fails once again it will probably come down to the ascending trendline, standing at $3.22, as bulls bail out in frustration.

4. Fundamental Analysis
4.1. Number of Shares Outstanding



As I said in the beginning, the share count is now roughly triple of what it was in 1994, so even though the share price is the same, the market cap is three times larger than back then.

After spending 11 consecutive years printing shares, SLR bought back shares over this latest year, which is a positive development. Current market cap is 903 million*$3.47 = $3.13 B.

4.2. Liquidity



We can see the deterioration in working capital since 2001. Still, SLR has $2 B in working capital in the balance sheet, but $1.4 B is receivables and $1.5 B is inventories (also $1.6 B in accounts payable on the liabilities side), so this working capital number can be misleading. $1.1 B in cash and equivalents, which is the lowest since 2001.

4.3. Revenues



Revenues declined from $18.7 B in 2001 to $10.56 B in 2006, a 44% decline. The share price fell 76% over the same period. It's curious to see that the stock fell 50% in 2001, which was its best year ever in revenue terms (but it was also the company's first negative EPS year as you'll see on the graph below).

Anyway, the sales multiple is $3.33 B / $10.56 B = 0.31. The revenue multiple for its industry is 0.62.

4.4. Profits



Not much reliability in these EPS numbers. EPS of $0.15 is exactly the same as it was in 1994, yet the market cap is three times larger (although the share price is the same). Well, revenue is much higher now too.

2006 was the best year since 2000 for Solectron. PER is 23, whereas for its industry it is 17.

4.5. Recent News

Solectron's Quarter Looks Brighter

I don't think this news is relevant enough, just a delay, nothing changed for the long term outlook.

5. General Overview

I have mixed feelings about SLR. The chart looks promising, especially if the stock is able to close meaningfully above $3.47, but fundamentals aren't appealing. This would be a turnaround play and I'm not a big fan of turnaround plays. I prefer something new, growing fast from a low base, not something as big as SLR that maybe, I said maybe, can flourish again.

The revenue multiple is lower than average, but the EPS multiple is higher than average, so I don't see any inefficiency here.

I'll continue studying 3 stocks per day, looking to know them and waiting for trading/investment opportunities. If you would like to receive my daily analysis on stocks on your mailbox, please register.

[usedcasting]

Keeping an eye on this one!

uc.