I profiled Coinstar (NASDAQ:CSTR) in early January when the shares were trading at $50 a share. The shares are up more than 10% since then. Almost all the attention in this space is devoted to Netflix (NASDAQ:NFLX), which is experiencing faster revenue growth but also has nosebleed valuations (just under 140x this year's consensus earnings). Coinstar is a cheap stock and it prospects are improving. As such, the stock warrants an update.
Here are some recent positives for Coinstar:
- The consensus earnings estimates for FY 2014 have gone up some 8% over the last three months.
- B. Riley had a piece in Barron's today stating stock could rise 40% to $80 a share. The investment firm states investors are missing how big a market the rental DVD space encompasses.
- The company finally launched its streaming service.
- Coinstar floated $350 million of debt at 6% recently. The proceeds will be used to buy back stock and will remove over 15% of float at current price levels.
Coinstar provides automated retail solutions. The company owns and operates self-service Redbox kiosks that enable consumers to rent or purchase movies and video games, as well as self-service coin-counting kiosks.
Here are four reasons why CSTR is still cheap at just over $55 a share:
- The stock sells for under 10x 2014's projected earnings.
- The company is expected to post 10% revenue growth this year, and the stock boasts a five-year projected PEG of under 1 (.71).
- Coinstar has improved operating cash flow by some 50% over the past two fiscal years, and the stock sells for less than 4x current operating cash flow.
- Analysts consistently underestimate the company's earnings power. Earnings have beat consensus for seven straight quarters.
Disclosure: I am long CSTR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.