By Roger Choudhury, Lead Editor
We screened for companies that trade under $10 and show promising earnings or revenue growth. Here is what we found:
IEC Electronics (IEC) posted a return on invested capital of 8.4% and $107 million in revenues in the 12 months ending on December 31, 2010. Profit and EBT margins were 16.8% and 7.09%, respectively. Ending in September, profit margins in 2010, 2009, 2008, 2007, and 2006 were 16.8%, 15.96%, 12.17%, 9.48%, and 12.17%. The respective EBT margins were 7.3%, 6.96%, 3.2%, 1.23%, and 0.95%. The current ratio is 2.07 with a D/E of 1.48.
Because the EPS is $0.51, this implies a P/E of 15.2. From October through December 2010, EPS grew 37.5% quarter-on-quarter, after having fallen 7.69% and 53.57% year-on-year in both fiscal years 2010 and 2009.
Shares are trading near the historical top end of the price to sales per share multiple. This is probably because revenues grew by 42.56% in FY 2010, 32.72% in FY 2009, and 24.88% in FY 2008.
The company is a Rochester, N.Y.-based contract electronic manufacturer. Clients hail from the military and defense, aerospace, medical, and industrial sectors. Notable customers are GE, Boeing (BA), Foster Miller, and BAE Systems (BAESY.PK). IEC acquired GTC from Crane (CR) in December 2009, bolstering exposure to the military and defense sectors. It also bought Celmet in July 2010, providing vertical integration, and supporting all metal needs. It also added Southern California Braiding, which was the 2010 Marshall Space Flight Center Small Business Subcontractor of the Year, and 2008 Boeing Supplier of the Year.
Year-to-date, IEC shares are up 5%, and up 47.7% since January 2010. The market cap is $75 million.
BioScrip (BIOS) grew revenues by 23.2% to $1.63 billion in 2010, after dropping by 5.16% in 2009 and rising by 17.05% in 2008. The company produced a net loss of $69.1 million due to pricing concessions on various specialty drugs, reimbursement pressures, AWP standardization changes, and the weak economic environment. However, the company acquired and integrated CHS, and enhanced its competitive position in Infusion and Home Health Services. Moreover, with the impending retirement of the baby boomer generation, the company has a good business model. As so, in 2011, the Street expects an EPS in the range of $0.14 to $0.30, after posting - $1.37 in 2010.
The company has a D/E ratio of 1.18.
The company is a national provider of specialty pharmacy and home care products and services that partners with patients, physicians, hospitals, healthcare payers and pharmaceutical manufacturers to provide clinical management solutions and delivery of cost-effective access to prescription medications. The company’s services are designed to improve clinical outcomes for chronic and acute healthcare conditions while controlling overall healthcare costs.
ReneSola (SOL) grew revenues by 136.2% to $1.2 billion and profits soared to $169 million in 2010. EPS came in at $1.94, after posting - $0.98 in 2009. Also, the EBT margin was a healthy 18.99%. The company’s debt to equity ratio was a manageable 0.37. The company’s price to sales per share ratio is 0.7, whereas competitors’ have much higher multiples: First Solar (FSLR) with 5.4, Trina Solar (TSL) with 1.6, LDK Solar (LDK) with 1.1, and Yingli Green Energy (YGE) with 1.3.
The company expects to ship between 400-450 megawatts to new and existing customers in 2011. In comparison, the company shipped 291.1 megawatts in 2010. Res ipsa loquitur. Good opportunity here.
Xerox (XRX): The company expects to grow adjusted EPS in a range from $1.05 to $1.10, which would be an increase from $0.94 or growth of 11.7% to 17.0%. Profits grew by 24.95% in 2010, but EPS dropped by 21.82%. However, profits also jumped by 111.54% in 2009. Revenues also grew by 42.52% in 2010. Also, shares trade with a price to sales per share multiple of only 0.6, when in 2005, 2006, 2007, those figures were 0.9, 1.0, and 0.9, respectively. Nevertheless, EBT margins remain razor-thin: 3.77% in 2010, and 4.13% in 2009.
The company opened 2010 with the acquisition of Affiliated Computer Services, which transformed the company into the world’s leading enterprise for business process and document management.
Analysts expect 2011 adjusted EPS to come in between $1.05 and $1.17.
The company also pays a quarterly dividend of $0.0425, which is a current yield of 1.7%.
Citigroup (C) has shown four straight quarters of profit, after being squarely embroiled in the financial meltdown of 2008. In sum, the company made $10.6 billion in profits in 2010. The company also grew revenues by 7.87% in 2010, and 52.08% in 2009. The EBT margin in 2010 improved to 15.22%. In its heyday, Citigroup traded with P/S multiples in the 3’s. Now, it is 1.5, and the industry average is 1.3.
EPS came in at $0.35 in 2010, recovering from -$0.80 in 2009. Analysts expect 2011 to produce an EPS between $0.32 and $0.55.
Shares trade under $5. This is a long-term play.
Aegon (AEG) is one of the world’s largest life insurance, pensions and asset management companies. Its approximately 27,500 employees serve nearly 40 million customers across the globe. 71% of underlying earnings came from the Americas, 17% from the Netherlands, 3% from the U.K., and 9% from new markets (Spain, Central & Eastern Europe, Asia, and Latin America).
Profits increased to €1.76 billion ($2.46 billion) in 2010 from €204 million ($285.9 million) in 2009, yet the company has had trouble getting consistent revenues, so it is focusing on sustainable earnings growth with an improved risk profile. To accomplish this, the company is considering divesting Transamerica Re (+€80 million euros), increase the share of underlying earnings for new markets from 8% to 15% to 20% by 2015, and consolidate operations in the US (i.e. Louisville and Baltimore).
The company has had six straight quarters of positive EPS. Q3 2009 vs. Q3 2008: $0.09 vs. -$0.38; Q4 2009 vs. Q4 2008: $0.17 vs. -$1.07; Q1 2010 vs. Q1 2009: $0.23 vs. -$0.19; Q2 2010 vs. Q2 2009: $0.11 vs. -$0.29; Q3 2010 vs. Q3 2009: $0.42 vs. $0.09; Q4 2010 vs. Q4 2009: $0.22 vs. $0.17.
Shares trade ~$7. They also trade with a P/S multiple of 0.2, and at its best in 2007 and 2008, the multiples were 0.5 and 0.9, respectively.
Frontier Communications (FTR): Revenues in 2010 came in at $3.79 billion, which was an increase of 79.31%, after dropping by 5.33% in 2009. Profits grew by 26.40% in 2010, after falling by 33.88% in 2009. The respective EBT margins in 2010 and 2009 were 7.13% and 9.12%, but were in the teens from 2005 to 2007. Shares trade with a P/S multiple of 1.4. From 2004 to 2007, those figures were 2.0, 1.9, 2.3, and 1.8, respectively. EPS was $0.23 in 2010, $0.38 in 2009, and $0.57 in 2008.
Currently, shares trade near $8. The company has also paid quarterly dividends since 2004. The current yield is a high 9.4%, partly because of the uncertainty in the markets, fueled by Japan, the Middle East, and gas prices at the pump. Not too long ago, it was yielding ~8%.
On July 1, 2010, Frontier acquired the defined assets and liabilities of the local exchange business and related landline activities of Verizon Communications (VZ) in Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin and in portions of California bordering Arizona, Nevada and Oregon (the Territories), including Internet access and long distance services and broadband video provided to designated customers in the Territories.
Frontier acquired approximately 4.0 million access lines in this transaction. As a result, the company is the nation’s largest communications services provider focused on rural areas and small and medium-sized towns and cities in 27 states, and the nation’s fifth-largest Incumbent Local Exchange Carrier, with approximately 5.7 million access lines, 1.7 million broadband connections and 14,800 employees as of December 31, 2010.
Huntington Bank (HBAN) made $2.6 billion in revenues in 2010, which was +9.50%, after +8.54% in 2009, +13.18% in 2008, and +25.18% in 2007; over all, solid revenue growth. However, profits painted a different story. Profits managed to hurdle over negative territory from -$3.09 billion to $312 million. The EBT margin in 2010 was a decent 13.24%. EPS came in at $0.19 in 2010, and analysts expect $0.45 to $0.60 in EPS in 2011. The company also expects pre-tax, pre-provision income levels to remain in line with 2010 second half performance.
Huntington Bancshares is a $54 billion regional bank holding company headquartered in Columbus, Ohio. Through its affiliated companies, Huntington has been providing a full range of financial services for 144 years. Huntington offers checking, loans, savings, insurance and investment services. It has 620 branches and also offers retail and commercial financial services online at huntington.com; through its telephone bank; and through its network of over 1,350 ATMs.
LSI made $2.57 billion in revenues in 2010, which was an increase of 15.81%, after declining 17.11% in 2009. Net income went from red to green from a loss of $48 million to $40 million. The company also beat consensus EPS estimates for seven straight quarters. In 2010, EPS was $0.06. Shares trade with a P/S multiple of 1.6, which is below the 2008 level of 1.8. However, the EBT margin in 2010 was 1.77%.
Q1 2011 Business Outlook:
- Projected revenues of $605 million to $635 million
- GAAP net (loss)/income in the range of ($0.03) to $0.07 per share
- Non-GAAP net income in the range of $0.07 to $0.13 per share
- Q1 2010 Non-GAAP net income was $0.14 per share and GAAP net income was $0.03 per share
The company designs, develops and markets complex, high-performance storage and networking semiconductors and storage systems. It also provides silicon-to-system solutions that are used at the core of products that create, store, consume and transport digital information.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.