Archive for 2006

• How Low Can It Go?
  Eddy Elfenbein, June 21st, 2006 at 6:28 am

  I often hear people say that a particular stock is so cheap, “how much lower can it really go?” The answer is, it can go a lot lower. A stock can drop 99% and it’s still not at zero. It can drop another 99%, and it’s still worth something. In fact, a stock can drop 99% many, many times, and still not reach zero.
  Delistings don’t make a lot of news, but they happen every week. Here’s a graph of issuers on the NASDAQ since 2003:
  

• A Stock Market in Rwanda?
  Eddy Elfenbein, June 21st, 2006 at 6:02 am

  Not yet says a study. But wouldn’t be nice to see a market there soon?

• Otis Spunkmeyer Files for IPO
  Eddy Elfenbein, June 20th, 2006 at 11:01 am

  
  One of my favorites is going public.

  The San Leandro, California-based company said in a registration statement with the Securities and Exchange Commission that it planned to use the IPO proceeds to repay debt, to redeem Class A preferred stock and for general corporate purposes.
  Otis Spunkmeyer said its principal focus was selling frozen cookie dough products to the food service channel, which represented 63 percent of its net sales in fiscal 2005.
  According to restated results, the company earned $5.4 million on $336.3 million of net sales in 2005.
  The filing said Merrill Lynch & Co. and JPMorgan were underwriting the offering.
  The document did not reveal how many shares the company planned to sell or at what price. Those details will probably be revealed in future filings.

• Looking At Bed Bath & Beyond
  Eddy Elfenbein, June 20th, 2006 at 10:34 am

  If you’re new to investing, Bed Bath & Beyond (BBBY) is a good stock to look at. The financials are about as straightforward as they come. No pro forma nonsense or huge “one time” charges that seem to happen every single quarter (Cendant, I’m looking at you).
  Here are BBBY’s financial results for the past few years:

  Quarter	Sales	Gross Profit	Operating Profit	Net Profit	EPS
  May-99	$356,633	$146,214	$28,015	$17,883	$0.06
  Aug-99	$451,715	$185,570	$53,580	$33,247	$0.12
  Nov-99	$480,145	$196,784	$50,607	$31,707	$0.11
  Feb-00	$569,012	$238,233	$77,138	$48,392	$0.17
  May-00	$459,163	$187,293	$36,339	$23,364	$0.08
  Aug-00	$589,381	$241,284	$70,009	$43,578	$0.15
  Nov-00	$602,004	$246,080	$64,592	$40,665	$0.14
  Feb-01	$746,107	$311,802	$101,898	$64,315	$0.22
  May-01	$575,833	$234,959	$45,602	$30,007	$0.10
  Aug-01	$713,636	$291,342	$84,672	$53,954	$0.18
  Nov-01	$759,438	$311,030	$83,749	$52,964	$0.18
  Feb-02	$879,055	$370,235	$132,077	$82,674	$0.28
  May-02	$776,798	$318,362	$72,701	$46,299	$0.15
  Aug-02	$903,044	$370,335	$119,687	$75,459	$0.25
  Nov-02	$936,030	$386,224	$119,228	$75,112	$0.25
  Feb-03	$1,049,292	$443,626	$168,441	$105,309	$0.35
  May-03	$893,868	$367,180	$90,450	$57,508	$0.19
  Aug-03	$1,111,445	$459,145	$155,867	$97,208	$0.32
  Nov-03	$1,174,740	$486,987	$161,459	$100,506	$0.33
  Feb-04	$1,297,928	$563,352	$231,567	$144,248	$0.47
  May-04	$1,100,917	$456,774	$128,707	$82,049	$0.27
  Aug-04	$1,273,960	$530,829	$189,108	$120,008	$0.39
  Nov-04	$1,305,155	$548,152	$190,978	$121,927	$0.40
  Feb-05	$1,467,646	$650,546	$283,621	$180,980	$0.59
  May-05	$1,244,421	$520,781	$150,884	$98,903	$0.33
  Aug-05	$1,431,182	$601,784	$217,877	$141,402	$0.47
  Nov-05	$1,448,680	$615,363	$205,493	$134,620	$0.45
  Feb-06	$1,685,279	$747,820	$304,917	$197,922	$0.67

  As always, I pass the graphics savings on to you.
  A few things to point out. You’ll notice that there’s a bulge in the February quarters (the company’s fourth, which technically end in early March but it’s my damn table). That’s because of the holidays so it’s important to compare similar quarters.
  Another thing you’ll notice—and something that I place a lot of emphasis on—is the company’s consistency. Here’s a chart of BBBY’s trailing four-quarter sales.
  
  That’s what I like to see, a nice smooth line. The red is Wall Street’s estimate. Yes, someone is paid a great deal of money to draw that line out a few more points. Like a nine-year-old couldn’t find a trend here.
  Now let’s look at the operating margins. This is important.
  
  This impresses me a lot. Operating margin is one of the purest measures of how efficiently a company is managing its business. BBBY has been doing very well lately. That last little downtick concerns me a little. But as long as the margins don’t show a severe downtrend, I’m not too worried. Few things are more painful to a company than eroding margins.
  Now here’s the company’s earnings-per-share:
  
  Once again, we see a nice smooth line. But what isn’t a smooth line is the stock chart. Shares of BBBY haven’t budged in over four years. This chart pretty much sums it up:
  
  Rising earnings and a flat stock means a plunging earnings multiple. This issue is really about risk. The stock could certainly stay flat, or even fall. Who knows…we can’t predict the future. But we can see that the company has performed very consistently, and its relative valuation is very low. That’s one of the best ways to control for risk.
  Earnings are due tomorrow after the market closes.

• FactSet’s Earnings
  Eddy Elfenbein, June 20th, 2006 at 9:26 am

  FactSet Research Systems (FDS) reported fiscal third-quarter earnings of 41 cents a share (including a penny a share from a tax benefit). This is good news. Wall Street was looking for 39 cents a share.
  The company also sees revenue for this quarter coming in between $102 million and $105 million. Wall Street was expecting $98.7 million. The stock is up in pre-market trading.

• P/E Ratio of the Hombuilders
  Eddy Elfenbein, June 20th, 2006 at 6:28 am

  Despite making huge profits, homebuilding stocks have been pummeled lately. Check out how low some of these P/E ratios are:

  Ticker	Company Name	Market Cap (bil)	P/E Ratio
  DHI	D R HORTON INC	$7.51	4.77
  PHM	PULTE HOMES, INC.	$7.13	4.74
  LEN	LENNAR CP CL A	$7.03	5.07
  CTX	CENTEX CP	$5.84	4.96
  KBH	KB HOME	$4.17	4.42
  TOL	TOLL BROTHERS INC	$4.08	5.15
  NVR	N V R L P	$2.97	5.45
  MDC	M D C HOLDINGS	$2.30	4.58
  RYL	RYLAND GROUP INC	$2.01	4.55
  BZH	BEAZER HOMES USA INC	$1.86	4.62
  HOV	HOVNANIAN ENT INC	$1.79	4.09
  SPF	STANDARD PACIFIC LP	$1.72	3.97
  HXM	DESARROLLADORA HOMEX	$1.52	15.25
  MTH	MERITAGE HOMES CORP	$1.23	4.26
  BHS	BROOKFIELD HOMES	$0.87	4.45
  TOA	TECHNICAL OLYMPIC	$0.81	3.33
  WCI	WCI COMMUNITIES INC	$0.80	4.03
  CHB	CHAMPION ENTERPRISES	$0.72	15.16

  This is, of course, trailing earnings. The profits are going to be a little harder to come by next year, and the year after.
  Homebuilding is the ultimate boom-and-bust industry–it’s all about timing. Don’t even think about buying a homebuilder until the last person has given up on the industry. Here’s how the sector has performed over the last three years:
  

• MarketWatch Goes Blogging
  Eddy Elfenbein, June 20th, 2006 at 6:08 am

  Welcome to blogging, Herb Greenberg, Bambi Franciso and Frank Barnako.

• Hurricane Season
  Eddy Elfenbein, June 20th, 2006 at 6:05 am

  Congratulations to the Carolina Hurricanes, the 2006 Stanley Cup Champions.
  Here’s how the Carolina-to-win contract traded at TradeSports during Game 7. I think you can tell when the goals were scored.
  

• Make a Killing in the Market
  Eddy Elfenbein, June 19th, 2006 at 3:45 pm

  Today’s market-induced suicidal tendencies story brought to you courtesy of India:

  The sudden stock market crash has triggered severe depression among a number of investors and some have even developed suicidal tendencies, according to a noted psyschiatrist in Ahmedabad.
  “The downswing in the Sensex has heightened anxiety level among several investors and many of them are coming to me in acute panic state as they want to end their lives,” Dr Hansel Bachech noted psychiatrist and Member Mental Health Authority, Gujarat.
  Usually the symptoms that they exhibit are dryness of the mouth, severe palpitation, breathlessness, uneasy feeling in the stomach, insomnia and acute fear.

  That’s strange. I get all those symptoms from listening to Garrison Keillor.

• Earnings Preview: Bed Bath & Beyond
  Eddy Elfenbein, June 19th, 2006 at 3:15 pm

  From AP:

  OVERVIEW: Home furnishings retailer Bed Bath & Beyond operated 742 namesake superstores as of the end of February, in addition to Christmas Tree Shops Inc., a discount home merchandise chain, and Harmon Stores Inc., a discount health and beauty retail chain.
  BY THE NUMBERS: The retailer didn’t provide any financial forecasts in its previous earnings release in April. Wall Street expects a quarterly profit of 35 cents per share on projected sales of $1.39 billion, according to a poll by Thomson Financial.
  ANALYST TAKE: “Despite concern over a softening macro environment, we remain very comfortable with our first-quarter estimate of 35 cents per share, which is in line with guidance and consensus,” Lehman Brothers analyst Alan Rifkin wrote in a June 15 client note. “From a risk/reward standpoint, we like the stock ahead of first-quarter earnings.”
  Rifkin added that as the home furnishings space continues to experience difficulties, “we believe it is prudent to focus on companies like Bed Bath & Beyond, where fundamental execution remains solid.”
  WHAT’S AHEAD: Rising interest rates and stubbornly high energy prices are damping consumer spending. Additionally, mass market discounters like Target and specialty retailers like Pier 1 Imports have made the home furnishings space intensely competitive.
  STOCK PERFORMANCE: Bed Bath & Beyond’s stock recently traded at $36.60 on the New York Stock Exchange, and is up slightly so far this year. It hit a 52-week low of $34.38 on June 14 and is off 22 percent from a year-high of $46.99 hit in July 2005.