Yahoo! Finance’s list of stocks rising on unusual volume is a great way to see which stocks are suddenly receiving attention from investors. Today’s winners are Dillard’s (DDS), TPC Group (TPCG), Unilever (UL), Open Text (OTEX), and Nielsen (NLSN). Let’s see if we can figure out what’s pushing these stocks up:
Dillard’s, Inc. – DDS had been steadily increasing for most of 2011. However, the recent bear market combined with poor earnings put this stock down, and apparently down too much. Today the stock is seeing gains as analysts further reflect on the earnings report. In fact, Dillard’s may not be in as much trouble as analysts initially believed. Compared to rivals Macy’s (M) and Saks (SKS), Dillard’s offers some interesting value metrics.
Dillard’s price to earnings ratio is 13.75, and its price/earnings to growth ratio is 2.32. Macy’s beats both of these numbers, 11.49 and 2.21 respectively. Saks, on the other hand, offers a much lower price/earnings to growth ratio at 1.33, but its price to earnings is higher; 24.84. As one can see, DDS stock is reasonably priced, but many investors question the company’s business model. Some speculate that DDS is selling its merchandise for too cheap.
Additionally, the company’s current stock repurchase is taking away some serious cash flows from the company. Regardless, with cash per share of 2.71, it’s not impossible that this is Dillard’s best move right now. On the other hand, many investors would probably prefer that this extra cash come in the form of a better dividend. Note that DDS dividend yield right now is a paltry 0.50%.
TPC Group Inc – TPC Group has seen ups and downs since about March, but the company is now benefiting from a strong earnings report. Perhaps the biggest highlight was a 100% increase in EBITDA from the previous quarter. Additionally, earnings per diluted share increased to $2.12, whereas it was only $0.80 one year ago.
Importantly, demand on the part of oil and chemical companies for TPCG’s products and services is quite strong despite a mediocre economy. TPC Group has also benefited from increasing its own prices while keeping costs down. This is sometimes a tough challenge because the materials that TPCG uses can have volatility in their own pricing. Regardless, TPCG’s executives have predicted that the company will be able to sell its own goods at high prices in the future.
They also noted that the company is profiting from reduced supply in the industry as a whole. In fact, butadiene is one product that’s doing especially well. While financial statements for the most recent quarter have not been released yet, it’s worth mentioning that this company has had 3 straight quarters of negative cash flow. TPCG also doesn’t compare well to competitors on some value measures. Note that TPCG’s price to earnings ratio is 16.83, compared to 13.70 for Dow Chemical (DOW), and 7.27 for Innospec (IOSP). Operating margin for TPCG is also lower than that for DOW and IOSP.
Unilever plc – Unilever has traded up and down quite a bit lately as investors weigh economic problems against the company’s strong business. Today seems to be a day where the company’s strength is winning out. As noted here, Unilever will win out regardless of how Europe’s debt problems are resolved because its main products are food. In fact, not only does UL make food, but products like Ben & Jerry’s are quite popular. Additionally, investors applaud the company’s 3.9% dividend yield at a time when stock price appreciation isn’t guaranteed.
Unilever is also valuable for its global business, discussed here. Another Seeking Alpha article also details reasons to consider Unilever. Important points are raised are the company’s strong balance sheet, good technical factors, and underpricing compared to analyst targets.
At the same time though, UL offers poor value compared to competitors such as Nestlé (NSRGY.PK) and Procter & Gamble (PG). UL’s price to earnings ratio is 16.18, and its price/earnings to growth ratio is 2.03. PG beats both of these numbers at 15.68 and 1.46 respectively. In additon, Nestle has some extreme value potential with its price to earnings ratio of 4.82. Unilever’s cash flows haven’t been terrific either. 431 million euros left the company in 2010, and 240 million euros have already left the company in 2011.
Open Text Corp. (OTEX) – Yesterday’s positive action seems to be a reversal in interpretation of what was happening to this software company on Friday. As explained here, the company’s earnings weren’t great, and a negatively received acquisition was also causing shareholders to sell out. Additionally, Susquehanna downgraded the stock to negative while making some rather disparaging remarks. The firm derided Open Text’s recent decisions and cited an increase in risk. Also, Susquehanna questioned demand for the company’s products, especially amidst the situation in Europe right now.
Investors certainly took note of Susquehanna’s downgrade, as seen here. As that piece explains, there is still plenty of reason to like OTEX due to its focus on content management. At the same time though, one must ask whether it really deserves a price to earnings ratio of 25.45.
Note that competitors EMC, IBM, and Oracle (ORCL) have price to earnings ratios of 24.50, 14.04, and 16.45 respectively. These companies also have stronger operating margins of 17.14%, 20.02%, and 35.73% respectively. (OTEX’s operating margin is 16.08%). Cash flows for OTEX haven’t been particular strong either – the company is down $88.44 million in cash for the 9 months ending March 31st, 2010. If there is strength to be found in one of OTEX’s statistics though, it is the price/earnings to growth ratio of 0.89.
Nielsen Holding B.V. (NLSN) – This somewhat well-known researcher in marketing and advertising actually had its initial price offering back in January. The stock has declined since May though, and the company has been recently affected by its purchase of Marketing Analytics Inc. This appropriately named company performs marketing analysis and should be a great fit for Nielsen.
As a newly publicly traded company, Nielsen has some interesting characteristics. First and foremost, the company’s trailing twelve month income is -$85 million. It also competes largely with companies that are privately owned, notably GfK SE (GFKAF.PK), Ipsos SA (IPSOF.PK), and The Kantar Group.
Regardless, compared to the market overall, NLSN offers some fairly normal statistics. Operating margin is 14.37%, price/earnings to growth ratio is 1.18, and price to sales ratio is 1.81. Quarterly revenue growth isn’t terrific though at 9.90%. Also, cash flow was negative for 2010 with the company losing $93 million. 2011 hasn’t been great either as the company has lost $47 million so far. Notably, NLSN has been switching from debt to equity to fund its operations, and at first glance we cannot agree with this move. However, the company’s executives may have its own reasons for this move, of which we are not privy to.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.