4 Buy And 1 Sell: Ideas By Cramer

 |  Includes: ACW, COST, LGND, PSMT, S
by: Efsinvestment

Cramer is back from his vacation, and he started making his Lightning Round TV show since yesterday. In Sep 7’s Lightning Round program, he mentioned five stocks, making four bullish and one bearish call. I have investigated all of his Lightning Round stock mentions from a fundamental perspective, adding my O-Metrix Grading System where necessary. However, my indicators mostly disagreed with Cramer this time. Here is a fundamental analysis of these stocks from Cramer's Lightning Round:

Stock Name


Cramer's Suggestion

O-Metrix Score

My Take

PriceSmart, Inc.


Buy, but alternative is better



Costco Wholesale Corp.





Accuride Corp.





Sprint Nextel





Ligand Pharmaceuticals





Click to enlarge

"PriceSmart is a good stock. I like the warehouse thing ... I am a believer in Costco ... buy, buy, buy. I love it." Cramer commented.

Here is a brief comparison between these two stocks:

Current as of Sep.7 close.



P/E ratio



Forward P/E ratio



Estimated EPS growth for the next 5 years



Dividend yield



Profit margin



Gross margin



Upside movement potential



Click to enlarge

O-Metrix scores of PriceSmart and Costco are 2.31 and 3.04, respectively. PriceSmart is trading 2.82% lower than its 52-week high, whereas Costco is trading 3.68% lower. PriceSmart’s debt-to assets ratio is slightly increasing since 2007, while that of Costco is decreasing. PriceSmart returned 141% in the last twelve months, and Costco returned 36.1%. P/E- forward P/E ratios are way too high for me, and both of them are poorly profitable. I would buy neither.

Cramer thinks that this is a good time to buy Accuride as truck part makers stocks “have fallen in half.” The Indiana-based Accuride shows a trailing P/E ratio of -17.4, as of Sep 7. Estimated annual EPS growth for the next five years is 36.00%, which is truly overdone given the -71.57% EPS growth of past 5 years. Profit margin (-0.6%) is below the industry average of 2.5%, and it has no dividend policy.

P/B (1.4), P/S (0.1), and debt-to equity ratio (1.1) are strong green flags. Target price implies a 97.7% upside potential, while the stock is trading 48.41% lower than its 52-week high. Accuride returned -47.0% since the beginning of the year, whereas its debt-to assets ratio is on a free fall since 2008. Gross margin is 8.6%, and operating margin is -0.3%. ROA, ROE, and ROI are -9.05%, -54.30% and -12.72%, respectively. While SMA50 is -18.39%, SMA200 is -35.10%. Just get rid of this stock.

Cramer says that Sprint Nextel’s financials are “too tough for him.” Sprint shows a trailing P/E ratio of -3.3, and a forward P/E ratio of -5.4, as of Sep 7. Analysts expect the company to have an annual EPS growth of 5.5% in the next five years. It pays no dividend yield, while the profit margin (-9.5%) is crushed by the industry average of 10.0%.

The stock returned -21.0% in a year, and it is currently trading 46.20% lower than its 52-week high. SMA50 and SMA20 are -20.06% and -24.66%, respectively. Target price implies an about 60.2% upside movement potential, while it stopped paying dividends in Nov 2007. Assets are going down sharply for the last five years. Operating margin is -0.04%, way below the industry average of 15.9%. ROA and ROE are -6.11% and -20.97%, respectively. I see no reason to have any relations with Sprint for now.

"Insiders have been buying the stock ... it [Ligand Pharmaceuticals] hit a 52 week high. Ordinarily, I would be careful, but that is a speculative biotech company that does drug delivery, and I'm staying in it."

The company was trading at a P/E ratio of -333.3, and a forward P/E ratio of 138.9, as of the Sep 7 close. Five-year annualized EPS growth forecast is 19.7%. With a thin profit margin of 5.4%, Ligand pays no dividend yield.

Earnings decreased by 214.47% this quarter, and 47.50% this year. P/B (58.8), P/S (13.6), profit margin, and debt-to equity ratio (9.6) are alarming red flags. The stock is trading 0.44% higher than its 52-week high, while it returned 78.4% in a year. Target price is $30.00, which implies a 88.0% increase potential. Operating margin is -106.8%. Debt-to assets ratio has come from 0% to 25% within the last three quarters. Moreover, the stock is highly volatile. Current upwards trend can easily come crushing down with this volatility. I would not risk my money in it.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.