On Friday's Mad Money program, Jiim Cramer made nine calls. Five of them were bullish and three were bearish. I have examined all of his stock mentions from a fundamental perspective, and added my opinion about them. I have applied my O-Metrix Grading System where possible, as well. Here is a fundamental analysis of these stocks from Cramer's September 22 Lightning Round:
Stock Name | Ticker | Cramer's Suggestion | O-Metrix Score | My Take |
Universal Display | No Call | N/A | Sell | |
Goldman Sachs | Avoid | 8.09 | Hold | |
Stamps.com | Buy | 4.02 | Risky Buy | |
Cummins | Risky Buy | 3.52 | Hold | |
AT& T | Buy | 5.52 | Buy | |
Aruba | Buy | 0.34 | Avoid | |
Teck | Avoid | 7.90 | Buy | |
McMoRan | Avoid | N/A | Avoid | |
Gold Resource | Buy Later | N/A | Avoid |
(Data from Finviz/Morningstar and is current as of September 22 close. You can download O-Metrix calculator, here)
Cramer asked for time to do some research on Universal Display before making a call. As of September 22, Universal Display has a P/E ratio of -96.2, and a forward P/E ratio of 63.3. Five-year annual EPS growth forecast is 24.50%. It has no dividend policy, while the profit margin (-54.4%) is terrible.
Target price implies a 1.8% downside potential, whereas the stock is trading 20.18% lower than its 52-week high. Operating margin is -20.4%. ROA and ROE are -9.84% and -11.28%, respectively. Assets are unstable, and cash flow is not that optimistic. PEG value is 1.6. Universal Display returned 117% in a year. P/B is 7.3, and P/S is 52.4, both of which are strong red flags. Insiders have been mostly selling stocks for a while. Long-term EPS growth estimate is irrational with these indicators. It is time to realize profits if you own it, as the current price is a suitable exit point.
Cramer is bearish on financials, including Goldman Sachs. The stock was trading at a remarkable P/E ratio of 6.7, and a forward P/E ratio of 6.3, as of September 22. Analysts estimate a 9.03% annualized EPS growth for the next five years, which is exaggerated given the -16.27% EPS growth of past five years. Profit margin (16.1%) crushes the industry average of 6.6%, while it offers a 1.49% dividend.
O-Metrix score of Goldman Sachs is 8.09, whereas its target price indicates a 66.4% increase potential. Earnings increased by 136.67% this quarter. The stock is trading 45.99% lower than its 52-week high, and institutions own 73.34% of the shares. PEG value is 0.5.
On the other hand, earnings decreased by 40.46% this year. Insiders own only 0.05% of the stock, while it returned -35.2% in a year. Goldman is yielding the same dividend since April,2006. SMA20 and SMA50 are -12.56% and -20.29%, respectively. Sales decreased by 9.26% this quarter. The debt-to assets ratio is slowly increasing since Q2 2010. Financial stocks are rolling down the hill, and Goldman Sachs is no exception. It is too late to sell. Hold if you own it, but do not buy.
Cramer likes what Stamps is doing and makes a bullish call on it. The California-based Stamps shows a trailing P/E ratio of 28.2, and a forward P/E ratio of 16.5, as of the September 22 close. Estimated annual EPS growth for the next five years is 18.0%. Profit margin (11.6%) nearly triples the industry average of 3.9%, while it pays no dividend.
Target price is $19.00, implying an about 9.4% downside potential. The stock is currently trading 17% lower than its 52-week high, whereas it returned 73.5% in the last twelve months. O-Metrix score is 4.02. Assets are decreasing sharply since 2006, and cash flow is going down. P/B is 5.9, and P/S is 3.3, both of which are strong red flags. Operating margin is 11.7%. Insiders have been exercising options and selling stocks for a while.
On the other hand, gross margin is 73.1%. SMA50 and SMA200 are 22.50% and 50.47%, respectively. Institutions own 72.84% of the shares, while PEG value is 0.9. Earnings increased by 503.30% this quarter, while sales increased by 25.68%. Operating margin, profit margin, and debt-to assets ratio (0.0) are strong green flags. Analysts give a 1.0 recommendation (1=Buy, 3=Sell). This is a buy, but a risky one.
"I'm willing to take the pain for a big 2012." Cramer said about Cummins. Cummins is the only stock he favors in its industry. It has a P/E ratio of 11.2, and a forward P/E ratio of 8.3, as of the September 22 close. Analysts expect Cummins to have a 5.0% annual EPS growth in the next five years. With a profit margin of 9.3%, it offered a 1.88% dividend in 2010.
Cummins is trading 29.34% lower than its 52-week high, while its O-Metrix score is 3.52. Target price is $122.33, indicating a 43.4% increase potential. Insiders hold 0.44% of the stock, whereas insider transactions have decreased by 13.18% within the last six months. SMA50 is -9.93%, and SMA200 is -17.16%. Insiders have been mostly selling stocks for some time. Cummins returned -3.5% in a year. Debts are increasing for the last three years, as well as assets. Operating margin is 14.1%, and PEG value is 1.7. Cummins may be worth holding, but not buying.
"It's a win win either way on the T-Mobile deal. I've been buying it [AT&T] for my trust." It has a P/E ratio of 8.4, and a forward P/E ratio of 10.8, as of the September 22 close. Five-year annualized EPS growth forecast is 4.4%. With a profit margin of 16.2%, and a dividend of 6.20%, AT&T is a gorgeous stock for dividend lovers.
The stock returned -2.7% in a year, while its O-Metrix score is 5.52. Target price implies a 19.4% upside potential, whereas it is trading 11.93% lower than its 52-week high. Earnings increased by 57.08% this year. Gross margin is 56.9%, and debt-to assets ratio is decreasing since 2008. Debt-to equity ratio is 0.5, far better than the industry average of 3.2. Moreover, it has a four-star rating from Morningstar. AT&T is a dividend pick for the next five years. This stock has been an outperformer and I expect it to outperform in the long-term.
Cramer is bullish on Aruba as it is “pretty strong.” Aruba was trading at a P/E ratio of 769.2, and a forward P/E ratio of 24.5, as of September 22. Analysts estimate a 27.5% annualized EPS growth for the next five years. With a profit margin of 0.8%, it pays no dividend.
Insiders own only 0.13% of the stock, and insider transactions fell by 39.95% in the last six months. Target price indicates a 25.0% increase potential, while it is trading 46.07% lower than its 52-week high. Aruba returned -6.9% in a year, whereas O-Metrix score is 0.34. P/B (7.9), P/S (6.0), profit margin, operating margin (-1.1%) and ROE (1.5%) are hopeless red flags. Just avoid this stock.
Although Cramer likes Teck, he can’t recommend it as it is a mineral company. As of September 22, Teck was trading at a P/E ratio of 9.8, and a forward P/E ratio of 5.4. Estimated annualized EPS growth for the next 5 years is 12.02%. It pays a 2.00% dividend, while the profit margin is 18.2%.
O-Metrix score is 7.90, whereas Teck returned -20.8% in a year. Target price implies a 18.6% increase potential, and it is trading 52.65% lower than its 52-week high. Earnings increased by 166.50% this quarter. Debt-to assets ratio is decreasing since 2008. Debt-to equity ratio is 0.3, way better than the industry average of 1.8. PEG value is 0.1, and institutions own 73.74% of the stock. Moreover, it has a four-star rating from Morningstar. I wouldn’t ignore Teck.
Cramer recommends going with better oil companies instead of McMoRan. McMoRan has a P/E ratio of -13.1, and a forward P/E ratio of -17.1, as of September 22. Five-year annualized EPS growth forecast is 5.00%. With a -38.3% profit margin, it pays no dividend.
Earnings decreased by 39.47% this quarter. SMA50 and SMA200 are -25.34% and -35.53%, respectively. McMoRan returned -34.2% in a year, whereas it is trading 47.17% lower than its 52-week high. Target price implies a 93.2% increase potential. Operating margin is -15.8%. While ROA is -9.28%, ROE is -32.94%. Insiders hold only 1.93% of the stock. Just get rid of it.
“Give it (gold) a little breather,” Cramer said about Gold Resources. It was trading at a P/E ratio of -344.8, as of the September 22 close. With a -10.3% profit margin, it offers a 3.02% dividend.
ROA and ROE are -10.80% and -13.79%, respectively. Target price indicates a 165% increase potential, while it is trading 36.36% lower than its 52-week high. Operating margin is -1.8%. Gold Resources returned 9.5% in a year. P/B (20.6) and P/S (22.9) are alarming red flags.
Besides, gold itself is a dangerous play. Although it went into a downwards trend for a short time, it is still a highly-overpriced precious metal. It experienced a sharp correction, and keeps rolling down. While this is a healthy sign, gold is still far from being a safe haven.
Disclosure: I am long T.