8 Buy And 2 Sell Ideas By Cramer - Part I

by: Efsinvestment

Jim Cramer is one of the most entertaining stock pickers on the street. He made tons of stock calls recently, trying to help homegamers pick profitable companies. In the week’s latest Lightning Round program, he made eleven calls. Eight of them were bullish, and two were bearish. I had to divide my article in two parts to analyze all the mentioned stocks. 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 Lightning Round:

Stock Name


Cramer's Suggestion

O-Metrix Score

My Take

Ulta Salon Cosmetics





Taiwan Semiconductor





ARM Holdings









Long-Term Buy





Long-Term Buy






Click to enlarge

(Data from finviz/morningstar and is current as of Sep 16 close. You can download O-Metrix calculator, here)

Cramer recommends buying Ulta Salon Cosmetics, as it reported great quarterly results. It shows a trailing P/E ratio of 48.1, and a forward P/E ratio of 32.6, as of Sep 16. Analysts estimate a 23.6% annualized EPS growth for the next five years. It pays no dividend yield, while the profit margin is 5.7%.

Ulta Salon had a 75.58% EPS growth this quarter, and 74.44% this year. O-Metrix score is 2.90. Target price indicates a 3.5% downside potential, whereas it is trading 1.33% lower than its 52-week high. P/B is 9.0, and P/S is 2.8, both of which are way above their industry averages. It returned 150.3% in a year. PEG value is 1.4. P/E ratio, P/S, and P/B are hopeless red flags. Moreover, the company has only one-star rating from Morningstar. Hold if you own it, but do not buy.

Along with Taiwan Semiconductor, Cramer also recommends ARM Holdings. Here is a brief comparison between these two stocks:

Current as of Sep.16 close.

Taiwan Semiconductor

ARM Holdings

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

Taiwan Semiconductors is trading 7.96% lower than its 52-week high, while ARM is trading 12.11% lower. Taiwan Semiconductors returned 25.2% in the last twelve months, whereas ARM returned 53.8%. Morningstar gives a three-star rating to Taiwan, and a two-star rating to ARM. I guess Taiwan Semiconductors is a much better buy when compared to ARM. Taiwan Semiconductors has a 6.57 O-Metrix score. Moreover, Taiwan Semiconductors is relatively less volatile than ARM.

Cramer thinks that Rent-A-Center is a good buy at this price. It has a P/E ratio of 12.0, and a forward P/E ratio of 8.8, as of the Friday close. Five-year annual EPS growth forecast is 10.1%. It pays a 2.21% dividend, while the profit margin is 5.6%.

Target price is $36.14, which implies a 24.6% upside potential. The stock is trading 20.19% lower than its 52-week high, whereas it has an O-Metrix score of 5.91. It returned 32.5% in a year. The debt-to assets ratio is on a free fall for the last four years. SMA20 and SMA50 are 8.97% and 6.70%, respectively. Debt-to assets ratio is 0.5, way better than the industry average of 5.5. P/E ratio, P/B (1.3), and profit margin are moderate green flags. PEG value is 0.9. Rent-A-Center has a very good business plan. I see significant growth potential and I think the stock is a good pick for the long-term.

Cramer is bearish on Coinstar, as the group is “too competitive.” Coinstar was trading at a P/E ratio of 17.5, and a forward P/E ratio of 12.6, as of Friday’s close. Estimated annual EPS growth for the next five years is 19.1%. Profit margin (4.1%) is slightly lower than the industry average of 3.9%, while it has no dividend policy.

Earnings increased by 151.06% this year, and 54.90% this quarter. Target price is $62.52, indicating a 30.4% upside movement potential. Its O-Metrix score is 6.34. Coinstar is trading 29.09% lower than its 52-week high, while it returned 19.0% in a year. Sales increased by 27.13% this quarter. Operating margin (11.0%) crushes the industry average of 4.8%. P/E ratio, P/B (3.3), and debt-to equity ratio are moderate green flags. PEG value is 0.7. It is true that the competition is tough in the DVD rental service. However, I think Coinstar’s Red Box business will be a huge profit booster in the long-term. The stock is an excellent pick to go long.

Cramer recommends looking at Salesforce.com on Monday, and he believes that it could “come roaring back when the slow summer months are over.” As of the Sep 16 close, it was trading at a P/E ratio of 625.0, and a forward P/E ratio of 72.5. Analysts expect the company to boost its annual earnings by 22.9% in the next five years. It pays no dividend yield, while the profit margin (1.5%) is crushed by the industry average of 12.1%.

Insiders own only 0.68% of the shares, whereas O-Metrix score is 0.32. Target price implies a 15.1% upside potential, and it is trading 14.71% lower than its 52-week high. Salesforce returned 16.9% in a year. Since 2009, debt-to assets ratio has come from 0% to 20%. Operating margin is 0.8%. ROA, ROE, and ROI are 0.92%, 2.12% and 1.36%, respectively. Profit margin, P/B (13.1), P/S (9.7), operating margin, and ROE are hopeless red flags. Moreover, it has a one-star rating from Morningstar. Expecting a remarkable performance from this stock would not be wise, in my opinion.

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

Continue to Part II >>