I have had Jim Cramer, the “Mad Money” host, in focus for a while. I have been investigating his stocks from a fundamental perspective, as well as his alternatives to them. He closed the week with 5 bullish and 1 bearish calls, some of which are offering nifty dividends to shareholders. Here is a fundamental analysis of these stocks from Cramer’s Lightning Round mentions on July 29:
Caterpillar Inc. (CAT): Cramer thinks that Caterpillar represents “great value”, and this stock is a buy. As of July 29, the Illinois-based Caterpillar has a P/E ratio of 17.5, and a forward P/E ratio of 10.89. Analysts expect the company to have an annualized EPS growth of 21.20% in the next five years. With a profit margin of 7.8%, Caterpillar offered a 1.86% dividend last year. Earnings increased by 39.22% this quarter, and 190.36% this year. The stock is trading 14.88% lower than its 52-week high, and target price indicates a 34.4% increase potential. ROE is 34.23%, and Caterpillar returned 41.6% in the last twelve months.
Its O-Metrix score is 8.12, well above the market average. Yields are consistent, while debt-to assets ratio is nearly stable for the last 5 quarters. Average analysts recommendation for Caterpillar is 2.10 (1=Buy, 5=Sell). The company has had strong momentum since March, 2009. I believe the momentum will not fade away so easily. If the analyst estimates of 21.2% EPS growth holds, Caterpillar can beat the market in long-term.
Exelixis, Inc. (EXEL): Exelixis returned 146% in a year, and Cramer is bullish on this stock. Although it has terrible indicators, I have to say that it is a profitable company with strong upside potential. It is currently trading 39.94% lower than its 52-week high, while target price implies a 45.4% increase potential. Earnings increased by 39.38% this quarter, and 32.63% this year. Also, debts and assets are unstable.
Insider transactions for the last six months have increased by 118.12%, whereas institutions own 75.71% of the stock. Insiders have been exercising options for a while. The company has to stabilize its debt-to assets ratio. Moreover, the stock is extremely volatile. Staying neutral until the stock is more trustworthy should do OK.
Photronics, Inc. (PLAB): He is bearish on most of the technology stocks including Photronics, apart from Google (GOOG), Apple (AAPL), and Microsoft (MSFT) (full analysis here). It shows a trailing P/E ratio of 42.9, and a forward P/E ratio of 9.2, as of Friday’s close. Analysts estimate an 11.00% annual EPS growth for the next 5 years, which sounds utopic given the -14.84% EPS growth of past 5 years.
Photronics has a thin profit margin of 2.4% with no dividend policy. P/S is 0.92 and P/B is 0.88. Earnings increased by 143.88% this year, while the stock is trading 26.31% lower than its 52-week high. It returned 65.4% in a year, and target price indicates a 52.4% increase potential. Debt-to assets ratio is decreasing sharply for the last two years. I would not ignore this stock as it is likely to outperform after Q3 of this year.
Buckeye Partners (BPL): Cramer believes that Buckeye has "great yield, really steady cash flow," and this is “exactly what you should be buying." As of the July 29 close, the oil & gas transporter was trading at a P/E ratio of 27.0, and a forward P/E ratio of 17.01. Estimated annualized EPS growth for the next five years is 8.38%, while earnings increased by 40.22% this quarter.
The stock is trading 9.41% lower than its 52-week high, and target price implies a 10.1% upside movement potential. It returned 0.9% in a year. Although profit margin is thin (2.7%), dividend yield is outstanding (6.36%). Debt-to assets ratio slightly going down for the last three quarters. Its O-Metrix score is 3.34. Although it has been a rough year for Buckeye, I believe the company will mend itself.
PPL Corp. (PPL): Cramer likes this stock, especially its dividend yield. As of July 29, the company shows a trailing P/E ratio of 11.5, and a forward P/E ratio of 11.3. Analysts expect the company to have an 8.10% annualized EPS growth for the next five years, which is quite reasonable when its 4.06% EPS growth of past 5 years is considered. With a profit margin of 12.9%, and a dividend yield of 5.02%, PPL is a superb stock for dividend lovers. Earnings increased by 101.32% this year, and 28.23% this quarter.
SMA50 is 1.00%, while SMA200 is 7.46%. Insider transactions for the last six months have increased by 35.12%, whereas the stock is trading only 2.89% lower than its 52-week high. Its O-Metrix score is 5.75, and target price implies a 5.5% upside movement potential. Gross margin is 59.0%, and operating margin is 26.1%. Debts are increasing sharply, as well as assets. PPL is a dividend stock for the next 5 years, and it will outperform in the near future.
GlaxoSmithKline (GSK): GlaxoSmithKline returned 26.3% in a year, and Jim Cramer is still bullish on it. The drug manufacturer, as of the Friday close, was trading at a P/E ratio of 38.2, and a forward P/E ratio of 11.16. Analysts expect the company to have a 5.47% annual EPS growth in the next five years, which sounds overdone given the -17.22% EPS growth of last 5 years. Net profit margin is 6.6%, while it pays a dividend yield of 4.69%. Debt-to assets ratio is nearly stable for the last five quarters. Gross margin is 73.1%, and the stock is trading only 2.03% lower than its 52-week high.
SMA50 and SMA200 are 3.79% and 11.85%, respectively. Target price is $45.00, which indicates a 1.3% upside potential. A pullback will create the proper environment for entry. However, trailing twelve month P/E ratio is too high along with future expectations. Its O-Metrix score of 2.05 is way below the market score.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.