By Larry Gellar
We’ve identified 5 stocks that look ready to skyrocket. Snatch up these shares while they’re still cheap:
Western Union Co. (WU) has fallen significantly lately, and the time to buy could be now. The company’s annual Anti-Money Laundering & Anti-Fraud & Compliance Conference is always a big hit, and here’s what Chief Compliance Officer Joe Cachey had to say about it: “This event is a unique learning experience, allowing professionals from a wide variety of financial services firms to better identify and protect their organizations against fraud.”
Western Union is also creating a new division tasked with figuring out new services it can provide to customers. CEO Hikmet Ersek describes it as a program that will “allow us to build deeper relationships with existing and new consumers and to expand our portfolio with new services.”
As for financial news, the company recently declared an eight-cent quarterly dividend. Important competitors for Western Union include American Express (AXP) and Moneygram International (MGI). Moneygram currently has negative earnings, although the price-to-sales ratio for that company is less than half of Western Union’s. Western Union is cheaper than American Express using measures like price-to-earnings, price/earnings-to-growth, and price-to-sales, though. Margins for Western Union are pretty strong: Gross margin is 43.16% and operating margin is 26.14%.
Kraft Foods Inc. (KFT) has been declining, although the big news in this industry is that PepsiCo (PEP) is contemplating a break-up of its business. Specifically, the food divisions would be separated from the drink divisions. Meanwhile, Kraft Foods is working on a split of its own. Kraft’s split involves creating a grocery company and a global snacks company, as described here. This will allow Kraft to differentiate the two companies to investors.
In other news, the company is on the Dow Jones Sustainability Index for the seventh straight year. Says Christine McGrath, “The Dow Jones Sustainability Index is the gold standard for responsible companies…As we continue on our sustainability journey, this is great recognition for our employees' hard work and an equally great incentive for us to continue raising the bar on our performance.”
Kraft’s biggest competitor may be Nestlé (NSRGY.PK). That company offers a significantly lower price-to-earnings ratio, although its price/earnings-to-growth ratio and price-to-sales ratio are both higher than KFT. As for margins, Kraft is pretty good but not quite as good as Nestlé; those numbers for KFT are 35.76% (gross) and 13.29% (operating). Additionally, quarterly revenue growth (year over year) at 13.3% is strong.
The Bank of New York Mellon Corporation (BK) has fallen significantly the past week, and the company has lost a lawsuit that that would prevent Liberty Media from splitting into two tracking stocks. BNY Mellon has also been involved in a settlement with Bank of America regarding that company’s infamous mortgage-backed securities. The $8.5 billion settlement appears to be one step closer to finalization.
Other news for BNY Mellon has included an agreement to handle services for three ETFs offered by Teucrium Trading. One of BNY Mellon’s managing directors had this to say: “We will continue to enhance our industry leading capabilities so we can provide the services that these innovative and diverse funds require for success.”
Other big players in the asset management business include Barclays (BCS), JPMorgan Chase (JPM), and State Street (STT). BNY Mellon has a higher price/earnings-to-growth ratio than all 3 of those while other statistics like price-to-earnings, price-to-sales, and margins are closer to the average. As for cash flows, the company had $57 million flow out in 2010 but brought in $1.885 billion during the first half of 2011. Investing activities outside of capital expenditures played a large role in the 2010 outflow.
The Home Depot, Inc. (HD) is about even for the past week, and Zacks recently reaffirmed the stock’s Neutral rating. Zacks’ price target is $35, but we’re a little bit more bullish than that. Home Depot is rapidly cutting costs by discontinuing its expansion of stores that already way too big. This is a move we like, and the company is doing other things as well to make its stores work better for customers.
Home Depot is also known for its numerous partnerships with the makers of the products themselves. This is one thing that gives the company an edge over Lowe’s (LOW). Home Depot’s supply chain has also impressed investors across the country. Inventory is managed better than ever. Furthermore, earnings have been strong lately, beating both analyst estimates and results from last year at this time.
The only concern here is Home Depot’s highly dependent nature on the economy. Price-to-earnings, price/earnings-to-growth, and price-to-sales ratios for Home Depot are all higher than those for Lowe’s, but that shouldn’t scare investors away. Operating margin and quarterly revenue growth (year over year) are better for Home Depot, although gross margin is a bit lower than Lowe’s.
Netflix, Inc. (NFLX) stock has gotten destroyed lately, which means this company could have some serious upside once it gets its act together. The controversy here is Netflix’s splitting into two separate companies, and we’re not here to say that that was a wise move. What matters now though is value, and this stock is cheap. A recent price increase leading to a decrease in subscriptions was also highly contentious. Regardless, CFO David Wells has come firing back, saying that the move will not be reversed.
One competitor for Netflix is Hulu, and that company recently announced it has more than 1 million subscribers now. Don’t be fooled, though -- Netflix and Amazon (AMZN) are still the big players in this industry. In fact, Netflix’s price-to-earnings and price/earnings-to-growth ratios are about a fourth of Amazon’s. Price-to-sales for NFLX is also cheaper.
Furthermore, Netflix offers better margins – 37.38% gross and 13.75% operating. Quarterly revenue growth (year over year) is 51.7%. As for cash flows, $60.27 million flowed in during 2010 and $19.29 million flowed out during the first half of 2011. Stock buybacks have played a large role in the recent cash outflow, as management remains confident.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.