In the past month, I've written a series of articles related to low-priced stocks to buy and low-priced stocks to avoid. These articles each focus on three stocks currently priced at under $10 per share that I believe worthy of buying or avoiding. Using the same format, I am going to write a series of articles on high-priced stocks worth or not worth their current price tags. These articles will focus on stocks currently priced at over $100 per share.
For this article, I will outline and review three stocks I think are worth their high price and should be considered when looking for stocks to add to your portfolio. In determining why I think these stocks are worth their current price, I will be looking at each company's financial performance, current valuation, recent trading activity, earnings and future outlook.
Stock No. 1
The Boeing Company (NYSE:BA) is one of the world's large aerospace companies. BA designs, develops, markets, and sells aircraft and services through five divisions: Commercial Airplanes, Military Aircraft, Network & Space Systems, Global Services & Support, and Boeing Capital. BA was founded in 1916 and its headquarters is in Chicago, Illinois.
|Profit Margin (Trailing Twelve Months)||5.06%|
|Return on Assets (Trailing Twelve Months)||4.43%|
|Return on Equity (Trailing Twelve Months)||62.19%|
|Revenue (Trailing Twelve Months)||83.02B|
|Revenue per share (Trailing Twelve Months)||109.18|
|Quarterly Revenue Growth (Year Over Year)||9.00%|
For Q2, BA saw an increase in revenue of $1.8 billion compared to the same period last year. The company raised yearly sales guidance by a billion with estimates up to $86 billion for 2013.
Current Valuation and Recent Trading Activity
Boeing is currently trading at $104.97, just $4.52 shy of its 52-week high and $35.94 higher than its 52-week low. BA is trading well ahead of its 200-day moving average of $91.73, but lower than its 50-day moving average of $104.67. BA has been the second-best Dow component on the year, up 39% year to date.
BA has a price-to-earnings value of 17.6x and a price-to-book value of 10.5x, with earnings per share of $6.03.
BA recently reported earnings per share of $1.67 for Q2 of this year. This was a beat of $0.09 compared to the estimate of $1.58. This was the company's 10th quarterly beat in a row and 14th out of its last 15 reports. Boeing has a 14.47 one-year earnings growth rate.
Boeing is a solid company in an industry with high barriers to entry. Recent increases in revenue and earnings are maintainable. The industry is cyclical so it will have ups and downs, but I feel that BA is poised for future success. With Boeing's consistent and growing dividend, I feel that this is a great stock to add to your long term portfolio.
Stock No. 2
Everest Re Group, Ltd. (NYSE:RE) is one of the world's leading providers of property and casualty insurance. The company operates in four divisions: U.S. Reinsurance, Insurance, International, and Bermuda. RE was founded in 1973 and its headquarters is in Bermuda.
|Profit Margin (Trailing Twelve Months)||18.53%|
|Return on Assets (Trailing Twelve Months)||3.99%|
|Return on Equity (Trailing Twelve Months)||14.87%|
|Revenue (Trailing Twelve Months)||5.23B|
|Revenue per share (Trailing Twelve Months)||103.73|
|Quarterly Revenue Growth (Year Over Year)||14.20%|
Premiums rose for RE by 11% in Q2 compared to the same period last year. For the first half of the year, book value of RE increased by 4.1%.
Current Valuation and Trading Activity
RE currently has a price-to-earnings value of 8.4x and a price-to-book value of 1.0x with earnings per share of $15.83.
RE is trading at $133.96, $3.54 lower than its 52-week high and $32.30 higher than its 52-week low. RE is trading above both its 200-day moving average of $127.55 and its 50-day moving average of $130.03.
For Q2 of this year, RE reported earnings of $5.10 per share, which was significantly higher than the estimate of $4.26 per share. RE has beaten earnings estimates handily in each of its last six quarterly reports. For Q2, RE reported 36% growth in net income EPS.
In the company's Q2 report, its CEO made the following statement, "Through six months, our annualized net income return on shareholders' equity is 21%. We returned $500 million to shareholders through share repurchases and dividends and grew book value per share, adjusted for dividends, by 5% despite falling bond prices and catastrophes. We believe we are well positioned to continue to increase shareholder value."
It is a statement I fully agree with. With RE's current financial strength and its commitment toward returning value to shareholders, RE is a strong buy in my opinion. I think the company will continue to reward shareholders for a long time to come.
Stock No. 3
Terra Nitrogen Company, L.P. (NYSE:TNH) is a producer and marketer of nitrogen fertilizer products. The company was founded in 1991 and its headquarters is in Deerfield, Illinois.
|Profit Margin (Trailing Twelve Months)||41.27%|
|Return on Assets (Trailing Twelve Months)||116.78%|
|Return on Equity (Trailing Twelve Months)||206.56%|
|Revenue (Trailing Twelve Months)||827.10M|
|Revenue per share (Trailing Twelve Months)||44.26|
|Quarterly Revenue Growth (Year Over Year)||10.10%|
TNH has seen steady and consistent growth in revenues and gross profits over the past four years. The company is on pace to see the same once again this year.
Current Valuation and Trading Activity
Terra Nitrogen has a price-to-earnings value of 12.5x and a price-to-book value of 13.3x.
TNH is currently trading at $226.07, $30.43 lower than its 52-week high and $30.05 higher than its 52-week low. It is trading above both its 200-day moving average of $219.14 and its 50-day moving average of $217.38.
For Q2, TNH reported earnings per share of $4.64. This was lower than the same period in 2012, however, for the first half of 2013 net earnings were up ($316.1 million vs. $279.0 million) compared to last year.
TNH pays a healthy quarterly dividend yielding over 8%. It isn't a consistent dividend, in that the price often varies quarter by quarter, but it has been growing (over 17% the past five years). With the company's strong financial position, a growing dividend, and a strong record of increased earnings, TNH is a solid buy in my opinion.
Each of the three stocks reviewed above (BA, RE, and TNH) has high a price, but in my opinion each has earned the higher price tag. These companies all have seen significant growth, pay substantial dividends, and have solid financial foundations. While each company may come across a few bumps down the road, I think that they are positioned well for long-term future success.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.