February 22, 2011 – 9:29 am
Over the past 10 years, ARBA appears as quite a success story and one of the few ‘internet bubble’ companies to survive and reach profitability, on a GAAP accounting basis at least. Looking beyond the reported accounting results, however, reveals that ARBA is not quite as profitable a company as it seems, and its valuation has out-grown its profits by a wide margin – the required combination of factors for making February’s list of most dangerous stocks.
January 18, 2011 – 8:25 am
HIDDEN GEMS:
1. Our discounted cash flow analysis shows that APOL’s current valuation (stock price of $42.31) implies that the company’s profits will decline by 60% and never grow again.
2. Economic earnings are higher than reported accounting earnings.
3. Excess cash of $1,201mm or about 20% of its market cap
By David Trainer
|
Posted in Stock Picks and Pans
|
Also tagged APOL, Apollo Group Inc cl A, Career Education Corp, CECO, COCO, Corinthian Colleges Inc, economic earnings, ESI, Invested Capital, ITT Educational Services Management Group, NOPAT, STRA, Strayer Education
|
November 22, 2010 – 9:05 pm
HIDDEN GEMS:
1. About $29 million in non-operating expenses (after-tax) cause reported earnings to be understated.
2. Our dis¬counted cash flow analy¬sis shows that TRV’s cur¬rent val¬u¬a¬tion (stock price of $55.49) implies that the company’s profits will decline by 30% and never grow again.
3. The company grew its economic earn¬ings by $827mm during its last fiscal year.
November 19, 2010 – 11:40 am
HIDDEN GEM: Our detailed valuation model shows that WDC grew its “economic” profits by 226% while accounting profits grew 194% during its last fiscal year. Economic profits rose by $769mm while accounting profits rose by $912mm.
November 2, 2010 – 8:02 am
RED FLAGS:
1. Misleading Earnings: RAX reported a $30mm increase in GAAP earnings while our model shows economic earnings declined by $13mm (a difference of $43mm or 7% of revenue).
2. Very Dangerous Valuation: Stock price of $25.636 implies RAX must grow its NOPAT at 25% compounded annually for 17 years. A 17-year Growth Appreciation Period with a 25% compounding growth rate is quite a high standard to beat, as per my post on How To Make Money Picking Stocks.
3. Outstanding Stock Option Liability of $205mm or 6.5% of current market value
October 26, 2010 – 7:54 am
HIDDEN GEMS:
1. Our discounted cash flow analysis shows that BMY’s current valuation (stock price of $27.16) implies that the company’s profits will decline by 35% and never grow again.
2. The company grew its economic earnings by $307.5mm (12% increase) during its last fiscal year.
3. The company has $9,507mm in Excess Cash, which we remove from our Invested Capital calculation. $9,507mm million is more than 20% of BMY’s market cap.
October 20, 2010 – 2:36 pm
HIDDEN GEM: AAPL’s economic earnings rose more than its accounting earnings during the last fiscal year. Economic earnings rose by $3,576 while accounting earnings rose by $2,401. And the company has $31,849mm in Excess Cash, a reflection of the strong profitability of the business.
October 19, 2010 – 7:54 am
RED FLAGS:
Misleading Earnings: CBG reported a $1,045mm increase in GAAP earnings while our model shows economic earnings declined by $358mm.
Very Dangerous Valuation: Stock price of $19.06 implies CBG must grow its NOPAT at 20% compounded annually for 15 years. Has any company ever done that, much less a commercial real estate company?
October 15, 2010 – 8:55 am
HIDDEN GEM: GOOG has over $24,100mm in Excess Cash, a reflection of the profitability of the business and a 64% deduction to Reported Net Assets for our Invested Capital calculation.
October 14, 2010 – 11:16 am
At a time when most of the public believes political leadership to be weak, we should not focus on finding scapegoats but rather on assuming accountability to help fix problems.