Jim Cramer is one of my favorite stock pickers on the street for all times. He entertains while presenting his show, and he is pretty good at stock picking. I have been writing about his Lightning Round and Mad Money picks for a while, and I am glad to see that my articles are drawing quite a bit of attention. In Sep 15’s Lightning Round program, Cramer made nine calls. Six of them were bullish, and the other three bearish. I have investigated all of these stocks from a fundamental perspective, adding my opinion about them. I have applied my O-Metrix Grading System where possible. Here is a fundamental analysis of these stocks from Cramer's Sep. 15 Lightning Round:
Stock Name | Ticker | Cramer's Suggestion | O-Metrix Score | My Take |
Texas Instruments | (TXN) | Buy | 5.71 | Buy |
Cliffs Natural | (CLF) | Buy | 9.27 | Long-Term Buy |
P.F. Chang’s China | (PFCB) | Avoid | 5.51 | Buy |
Yum! Brands | (YUM) | Buy | 3.69 | Hold |
Chipotle Mexican Grill | (CMG) | Buy | 2.47 | Avoid |
Alumina Limited | (AWC) | Avoid | 2.32 | Avoid |
Alcoa | (AA) | Buy | 4.97 | Buy |
Total SA | (TOT) | Buy | 7.47 | Buy Later |
American Capital Agency | (AGNC) | Do Not Buy Now | 19.96 | Risky Buy |
Cramer likes Texas Instruments’ big dividend boost it gave on Thursday, and he made a bullish call on it. The company has a P/E ratio of 10.5, and a forward P/E ratio of 11.7, as of Sep 16. Five-year annual EPS growth forecast is 10.8%. With a profit margin of 22.2%, it offers a 1.88% dividend.
Institutions hold 82.46% of the stock, while it is trading 23.45% lower than its 52-week high. O-Metrix score is 5.71. Target price indicates a 14.5% increase potential, whereas it returned 11.2% in a year. Texas Instruments has zero debts for the last five years. Gross margin and operating margin are 52.4% and 30.3%, respectively. While ROE is 30.39%, ROA is 21.45%. Debt-to equity ratio is 0.3, lower than the industry average of 0.5. Moreover, the company has a four-star rating from Morningstar. I wouldn’t ignore this stock.
I've been long on this stock [Cliffs Natural] for the last 20 points, and I was right for the 20 points before that Cramer commented.
Cliffs Natural was trading at an admirable P/E ratio of 7.2, and a forward P/E ratio of 5.1, as of the Sep 15 close. Analysts estimate a 10.0% annualized EPS growth for the next five years. Profit margin (26.3%) crushes the industry average of 4.7%, while it paid a 1.41% dividend last year.
Earnings increased by 52.30% this quarter, and 359.33% this year. Institutions own 87.08% of the shares. O-Metrix score of the company is 9.27, whereas it returned 22.5% in the last twelve months. Operating margin is 33.8%. ROA, ROE, and ROI are 15.67%, 35.41% and 22.76%, respectively. PEG value is 0.5. Average analyst rating for Cliffs Natural is 1.2 (1=Buy, 3=Sell). Target price is $123.91, which implies a 58.9% upside potential. Debt-to equity ratio is 0.7, far better than the industry average of 2.7. Cliffs Natural is trading 23.53% lower than its 52-week high. Moreover, the company significantly boosted its dividends. I guess this stock will outperform in the long run.
Instead of P.F. Chang’s China Bistro, Cramer would rather go with Yum! Brands and Chipotle. Here is a brief comparison between these three stocks:
Current as of Sep.16 close. | P.F. Chang’s China | Yum! Brands | Chipotle |
P/E ratio | 14.9 | 21.6 | 52.4 |
Forward P/E ratio | 16.0 | 16.7 | 36.6 |
Estimated EPS growth for the next 5 years | 13.6% | 12.1% | 22.0% |
Dividend yield | 3.44% | 1.86% | - |
Profit margin | 3.6% | 10.4% | 9.4% |
Gross margin | 17.9% | 28.5% | 26.1% |
Upside movement potential | 32.9% | 12.8% | 4.6% |
I eliminate Chipotle at first, as it is truly poor in terms of P/E- forward P/E ratios, upside potential, and O-Metrix score. I like their food, but the stock is expensive. Chang’s China is trading 44.02% lower than its 52-week high, whereas Yum! is trading 7.13% lower than its 52-week high. Chang’s China returned -35.8% in a year, while Yum! returned 17.1%. O-Metrix scores of Chang and Yum! are 5.51 and 5.74, respectively. Both of their debt-to assets ratios are decreasing for the last three years. Chang looks like a good buy. Holding Yum! is okay.
Cramer is bearish on Alumina: "I have enough problems with Alcoa, which I own for my charitable trust,” However, he is still bullish on Alcoa. Here is a brief comparison between these two stocks:
Current as of Sep.16 close. | Alumina | Alcoa |
P/E ratio | 68.0 | 13.8 |
Forward P/E ratio | 15.7 | 8.3 |
Estimated EPS growth for the next 5 years | 15.8% | 3.0% (Morningstar), 70.43% (Finviz) |
Dividend yield | 3.68% | 1.0% |
Profit margin | - | 4.0% |
Gross margin | 100.0% | 19.5% |
Upside movement potential | -8.0% | 53.0% |
Alumina is currently trading 43.99% lower than its 52-week high, while Alcoa is trading 35.76% lower. O-Metrix scores of Alumina and Alcoa are 2.32 and 4.97 (based on market derived estimation of Alcoa’s five-year annual EPS growth, 10.0%), respectively. Alumina returned -10.5% in a year, whereas Alcoa returned 5.6%. Alcoa is a much better buy when compared to Alumina.
Cramer believes that the 7.19% dividend of Total SA is sustainable, and he is bullish on this stock. The Paris-based oil& gas company shows a remarkable trailing P/E ratio of 6.4, and a forward P/E ratio of 5.9, as of Sep 16. Estimated annual EPS growth for the next five years is 2.0%. Although dividend yield (7.5%) is slightly better than the industry average of 7.1%, it pays an enjoyable dividend of 7.19%.
Earnings increased by 24.24% this year, and the stock returned -10.8% in a year. The debt-to assets ratio is nearly stable for the last five quarters, and O-Metrix score is 7.47. Total SA is currently trading 26.81% lower than its 52-week high, whereas its target price indicates an about 33.3% upside movement potential. Debt-to equity ratio is 0.3, way better than the industry average of 0.6. P/E ratio, P/B (1.2), P/S (0.5), ROE (18.9%), and debt- to equity ratio are moderate green flags. Total SA is one of the ten big oil dividends to watch. European stocks are suffering from the Euro-zone crisis, and this stock is no exception. However, I would keep an eye on it.
I've given up ... the stock [American Capital Agency] won't come in. I am going to say 'don't buy,' but that said, it has been a huge winner.
American Capital, as of Sep 16, was trading at a pretty low trailing P/E ratio of 4.6, and a forward P/E ratio of 5.6. American Capital, is a real estate investment trust (REIT). Similar to other REITs, the company is utilizing the difference between long-term and short-term interest rates to maximize its profits. It pays a gorgeous dividend of 18.76%, while the profit margin (92.8%) crushes the industry average of 12.9%.Latest dividend declaration date was Sep. 14, where the stock will go ex-dividend on Sep. 21st.
American Capital has an O-Metrix score of 19.96, and it is trading only 2.04% lower than its 52-week high. Target price is $31.16, which implies a 4.8% upside potential. The stock returned 1.8% in a year. Insider transactions have increased by 38.02% in the last six months, while sales rose by 423.29% this quarter. ROE and ROI are 18.30% and 17.90%, respectively. While SMA200 is 7.47%, SMA50 is 2.98%. P/E ratio, P/B (1.1), P/S (4.2), profit margin, ROE, are strong green flags. 11 out of 16 analysts recommend buying, and I agree with them.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
