By Roger Choudhury, Lead Editor
To find undervalued companies, we screened for companies that are trading below their 5 year price to sales per share average. We also added a degree of rigor by focusing only on those companies with healthy EBT margins [per-tax margins].
Annaly Capital Management (NLY) has a 5 year average price to sales multiple of 8.8. From 2005 to 2007, the P/S figures were 11.2, 14.2, and 11.4, respectively. Currently, shares trade with a P/S of 7.5 at under $18 per share. Revenues fell by 30.85% in 2010, after increasing by 70.83% in 2009 and 154.11% in 2008. Also, the company posted fat EBT margins in 2010 and 2009 with 88.32% and 93.79%, respectively. We think this is a safe idea for a retirement portfolio.
EPS dropped by 42.05% to $2.04 in 2010, after jumping by 450% in 2009. Street expectations for 2011 fall in the range of $2.13 to $2.84. The company reports Q1 2011 results on May 2.
The company also paid $2.56 in dividends in 2010. The company has a debt to equity ratio of 0.06.
Intel (INTC) has a 5 year P/S average of 3.2, and it currently trades at 2.7 times sales per share. In 2005, 2006 and 2007, the multiples were 4.0, 3.4 and 4.1, respectively. Shares are priced in the low 20’s.
The company drew in $43.6 billion in revenues in 2010, which is an increase of 24.19%, after declining 6.5% in 2009. Net income came in at $11.46 billion (+162.39%). In 2009, profits were only $4.36 billion (- 17.4%). In 2010 and 2009, profit margins were 65.3% and 55.69%, respectively, and the EBT margins were 36.78% and 16.2%, respectively. ROIC [return on invested capital] climbed to 24% in 2010 after posting only 10.28% in 2009. The current ratio is 3.39 with a minuscule D/E of 0.04. EPS jumped over 160% to $2.01.
Using Intel’s Q1 estimates of $11.5 billion in revenues and several expense deductions, EPS is projected to come in at $0.51. This implies an EPS of $2.10 for the year through Q1 2011. In the 12 months through Q1 2010, EPS was only $1.09. Q1 2011 results come out on April 19.
Canadian Imperial Bank (CM) has a 5 year P/S average of 3.0 with 2006 and 2008 posting figures of 2.9 and 5.2, respectively. Currently, CM shares trade with a multiple of 2.7. However, shares are at the top end of affordability at $80+ per share.
The company made 12,085 million CAD ($12,301 million) in FY 2010 through October, which was an increase of 21.73%, after growing by 167.36% in FY 2009. The EBT margins in FY 2010 and FY 2009 were 33.2% and 16.31%, respectively.
EPS in FY 2010 was 5.87 CAD ($5.975), which was an increase of 121.51%. In 2009, the company dug itself out of a hole from a 2008 EPS of - 5.89 CAD to 2.65 CAD. The company aims to grow EPS by 3% to 5% per year for the next 3 to 5 years.
On February 24, the company reported net income of 799 million CAD for the first quarter ended January 31, 2011, compared with net income of 652 million CAD for the same period last year. EPS was $1.92, compared with EPS of $1.58 a year ago. Q2 2011 earnings come out on May 26.
The company also has a debt to equity ratio of 0.48.
Adobe (ADBE) has a P/S ratio of 4.7 with a 5 year P/S average of 6.5. From 2004 to 2006, the P/S was in the 9’s. Price per share is in the mid-30s.
The company made $3.8 billion in revenues in FY 2010 through November, which was an increase of 28.99%, after declining by 17.71% in FY 2009. The respective EBT margins were 24.82% and 23.81%.
EPS grew by 101.37% to $1.47 in FY 2010, after falling by 55.67% in FY 2009. For Q1 2011, the company targets an EPS range of $0.54 to $0.59. Results come out on March 22.
The company also has a D/E of 0.29.
Tim Hortons (THI) has a P/S of 3.0. From 2006 through 2010, the P/S multiples were 3.2, 2.6, 3.2, 2.6, and 2.8, respectively. Also, shares trade under $50.
The company made 2.53 billion CAD ($2.58 billion) in revenues in 2010, which was an increase of 13.13%, after growing by 9.71% in 2009. The respective EBT margins were 33.43% and 21.24%.
EPS jumped by 118.29% to 3.58 CAD in 2010, after rising by 5.81% in 2009. The company expects EPS to come in between $2.30 and $2.40 in 2011. Q1 2011 earnings are released on May 10.
The company also has a D/E of 0.30.
Tim Hortons is the fourth largest publicly-traded quick service restaurant chain in North America based on market capitalization, and the largest in Canada. As of January 2, 2011, Tim Hortons has 3,750 systemwide restaurants, including 3,148 in Canada and 602 in the United States. Also, 8 out of every 10 cups of coffee sold in Canada is from Tim Hortons.
Yahoo (YHOO) has a P/S of 3.7. The 5 year P/S average is 4.0, but its best years were in 2005 and 2006 with P/S figures of 5.9 and 4.7, respectively. Also, shares trade under $20.
The company made $6.3 billion in revenues in 2010, which was a decrease of 2.1%, after tumbling by 10.38% in 2009. The respective EBT margins were 16.92% and 8.89%. However, in 2005 and 2006, those margins were 48.38% and 17.09%, respectively.
EPS shot up by 114.29% to $0.90 in 2010, after growing by 44.83% in 2009. Analysts expect a range of $0.66 to $0.83 for 2011. In Q1 2011, the company expects operating income to come in between $130 million and $160 million. Q1 2011 results come out on April 18. Moreover, the D/E is 0.01.
Though we like these tech companies more, and the immediate future is rather static for Yahoo, any pick up of sales will lead to rapid price appreciation.
New York Community Bancorp (NYB) has a P/S multiple of 5.0. In comparison, its 5 year P/S average is 6.0. Also, NYB trades under $20.
The company made $1.5 billion in revenues in 2010, which was an increase of 42.8%, after jumping by 53.82% in 2009. The EBT margins were 55.8% and 55.17%, respectively.
EPS grew modestly in 2010 to $1.24 (+9.73%), after climbing by 391.3% in 2009. For 2011, analysts expect EPS in the range of $1.20 to $1.42. Q1 2011 earnings come out on April 19.
NYB shares have a current yield of 5.6%. The company has a D/E of 0.08.
The company also grows aggressively through acquisitions. It completed 10 acquisitions from 2000 to 2010, including the FDIC-assisted acquisitions of AmTrust Bank on December 4, 2009 and Desert Hills Bank on March 26, 2010.
With assets of $41.2 billion at December 31, 2010, New York Community Bancorp is the 22nd largest bank holding company in the nation and a leading producer of multi-family loans in New York City, with an emphasis on apartment buildings that feature below-market rents.
The company operates two bank subsidiaries—New York Community Bank, a thrift, with 243 locations in Metro New York, New Jersey, Ohio, Florida, and Arizona; and New York Commercial Bank, with 34 branches in New York City, Westchester County, and Long Island, including 17 branches that operate under the name Atlantic Bank.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.