Chimera Investment (CIM) is currently yielding 16.14%. The company grew profits by 64.47% to $533 million in FY 2010 through October, after posting a return to positive territory in FY 2009 by drawing in $324 million in profits from -$120 million in FY 2008. For Q1 2011, the company made $156.22 million in profits. In comparison, Q1 2010 resulted in $95.46 million in profits.
For 2011, the Street expects non-GAAP EPS to be between $0.53 and $0.70. In 2010, non-GAAP EPS was $0.66. Trading in the mid-3s, it beat earnings estimates for six of the last nine quarters. This play is not purely for capital appreciation, but it is for the dividend payments. We consider this company to have a lot of potential. The company invests in U.S. government and private residential mortgage-backed securities representing interests in obligations backed by pools of mortgage loans. It also has a debt to equity ratio of 1.10.
UTI Worldwide (UTIW), operating through subsidiaries, is a supply chain services and solutions company. UTIW has a market cap of only $1.92B. Analysts say the company is focused on improving its efficiency and profitability through its processes rather than acquisitions. The stock currently trades at a 36 P/E multiple around $20 per share. The company had EBITDA of $176.47M in the last 12 months at a 2.65% operating margin.
Looking forward, we think shares could trade around $30 apiece even as the company's multiple contracts on the back of very strong earnings growth over the next 12 months. We think UTIW is a better bet than Expeditors International of Washington (EXPD) in the short-run based off of its more modest valuation.
JDS Uniphase (JDSU) is a provider of communications test and measurement solutions and optical products for telecommunications service providers, wireless operators, cable operators and network equipment manufacturers. The company is also a provider of communications test and measurement solutions and optical products for telecommunications service providers, wireless operators, cable operators, and network equipment manufacturers. In FY 2010 through June, the company posted a GAAP EPS of -$0.17. In FY 2009 and FY 2008, those figures were -$4.02 and -$0.10, respectively. Gross margin has steadily risen from 28.27% in FY 2006 to 40.11% in FY 2010 and 42.38% over the trailing 12 months.
Non-GAAP EPS in FY 2010 was $0.41. In FY 2011, analysts expect non-GAAP EPS to be between $0.87 and $1.00. Q1 and Q2 2011 produced non-GAAP EPS of $0.20 and $0.29, respectively. In comparison, it was $0.04 and $0.12 in Q1 and Q2 2010, respectively. For Q3 2011, assuming the company makes $440 million in revenues with an 11% operating margin, a conservative non-GAAP EPS estimate would be $0.175. Juxtapose that with $0.10 for Q3 2010. Analysts expect between $0.17 and $0.24 in Q3 2011.
JDSU trades with a price to sales multiple of 2.9. From 2005 to 2007, the multiples were 3.8, 2.6, and 2.0, respectively. The company also has a debt to equity ratio of 0.29. Year-to-date, JDSU shares are +43.9%.
Applied Materials (AMAT) is the global leader in providing innovative equipment, services and software to enable the manufacture of advanced semiconductor, flat panel display and solar photovoltaic products. In FY 2010 through October, GAAP EPS returned to green to $0.70 from -$0.23. In FY 2008, it was $0.70. Revenues grew by 90.46% to $9.54 billion, after declining by 38.33%. EBT margin was 14.53% in FY 2010, but was in the 20s from FY 2004 to FY 2007.Gross margin also improved to 38.91% from 28.54%.
In FY 2011, the Street expects non-GAAP EPS to be between $1.29 and $1.61, and the company expects $1.50+. In 2010, non-GAAP EPS was $1.03. Q1 2011 already produced $0.36 (versus $0.13 in Q1 2010). The next earnings release is on May 24. Analysts expect non-GAAP EPS to be between $0.35 and $0.39. In comparison, Q2 2010 produced $0.22.
AMAT shares trade with a price to sales multiple of 2.0. From 2001 to 2008, those multiples were 4.6, 4.4, 8.3, 3.7, 4.3, 3.1, 2.6, and 1.7, respectively. Due to the mixed bag of revenue and EPS growth, two more consistent quarters of revenue and non-GAAP EPS growth should give enough merit for the multiple to be near 2.5. The company also has a debt to equity ratio of 0.03.
Ford's (F) Alan Mullaly continues to pay down debt and produce cars that consumers want. The constraints in auto parts supply from Japan should ease over the next few months as manufacturing activity picks back up. This spring's market share gains by U.S. automakers, including Ford and General Motors (GM), will leave a lasting mark at the expense of Toyota (TM). Ford is still trading at a very low $14-15 per share, well below where it could trade a year from now. On a discounted cash flow basis, shares will be worth just under $30 apiece in 2012. EPS for 2011 is forecast at 113% with a five-year projection of nearly 13%. Broad trends suggest that Ford is stealthily improving its position in the competitive landscape: a consolidation of brands, a gain in market share over the past year and the shedding of debt.
On this last point, it was just announced that Ford will redeem, in cash, all 6.50% convertible trust preferred securities, effectively taking $3 billion in debt off its books and reducing total debt to $16 billion. As the next two earnings announcements loom, these dual events could act as a catalyst to bring Ford's stock price nearer to fair value. We use an 11% discount rate for the company.
ATP Oil and Gas (ATPG) turned cash flow positive in the first quarter but reported an earnings per share loss on May 10 due to oil well depletion allowances and capital asset depreciation and amortization. We think the real upside will come, surprisingly, from the credit markets, as ATP's production engine stabilizes its debt situation. Quarter 1 exit production was in the range of 25,000 BOE. The EPS loss on this production number was -1.04 vs. an "expected" -0.60 from analyst consensus.
As we pointed out last year (as did many other independent traders, to their credit), analyst opinion on smaller E&Ps like ATP only show major investment banking ignorance of the industry and offer little to investors looking to learn about these types of companies. The market for ATP's bonds, however, is more discriminating, and after a large offering just before the British Petroleum (BP) debacle last year, ATP bondholders are anxious to hear guidance on the ratings situation from S&P and other ratings agencies. These agencies will likely keep a close eye on cash flow growth at the company, and, with a predominantly oil well and predominantly natural gas well, respectively coming online at Telemark over the next six months.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.