Seeking Alpha
Recommended for you:
Profile| Send Message|
( followers)  

The Euro zone is trying not to let Greece go bankrupt uncontrolled, and gold is falling at dangerous rates for more than two weeks. Amidst this horrifying rough ocean, Jim Cramer is trying to help unsophisticated investors by giving them some tips on how to sail through. After a peaceful weekend, he came up with eleven stocks, and I had to divide my article into two parts. 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 the first six stocks from Cramer's September 26 Lightning Round:

Stock Name

Ticker

Cramer's Suggestion

O-Metrix Score

My Take

Arch Coal

(ACI)

Avoid

5.34

Buy, but alternative is better

CSX Corp.

(CSX)

Buy

6.11

Buy

World Wrestling Entertainment

(WWE)

Avoid

5.36

Avoid

Henry Schein

(HSIC)

Buy

3.92

Hold

Vodafone Group

(VOD)

Top Pick

1.06

Hold

DuPont de Nemours

(DD)

Buy

6.54

Long-Term Buy

(Data obtained from Finviz/Morningstar, and is current as of September 21. You can download O-Metrix calculator, here.)

Cramer rather prefers going with CSX Corp. instead of Arch Coal, when it comes to coal. Here is a brief comparison between these two stocks:

Current as of September 26 close.

Arch Coal

CSX Corp.

P/E ratio

15.7

12.4

Forward P/E ratio

4.3

9.7

Estimated EPS growth for the next 5 years

8.0%

11.0%

Dividend yield

2.68%

2.52%

Profit margin

4.5%

15.4%

Gross margin

26.1%

68.6%

Upside movement potential

109.7%

47.1%

Arch Coal is currently trading 55.28% lower than its 52-week high, while CSX is trading 29.21% lower than its 52-week high. O-Metrix scores of Arch Coal and CSX Corp. are 5.34 and 6.11, respectively. Arch Coal returned -36.9% in the last twelve months, whereas CSX returned 2.3%. Morningstar gives a five-star rating for both of them. It is hard to choose between the two, but CSX is slightly better with a higher O-Metrix score.

Cramer recommends staying away from World Wrestling, as it has no growth. It was trading at a P/E ratio of 15.1, and a forward P/E ratio of 12.1, as of September 26. Analysts estimate a 9.0% annual EPS growth for the next five years. With a profit margin of 9.2%, shareholders enjoyed a 5.17% dividend last year.

O-Metrix score of the company is 5.36, whereas it returned -32.6% in a year. Yields have been cut by 2/3 on July 2011. Target price is $12.25, indicating an about 32.0% upside movement potential. The stock is trading 33.38% lower than its 52-week high, while insiders own only 2.40% of the shares. SMA50 and SMA200 are -0.53% and -14.75%, respectively. Operating margin is 13.9%, and PEG value is 1.3. Insiders have been mostly selling stocks for a while. Analysts give a 1.7 rating for World Wrestling (1=Buy, 3=Sell). This stock is slowly dying. Stay away from it.

Cramer liked Henry Schein:

That's a good company, a nice non-cyclical company that's perfect for this environment. You should buy it.

As of September 26, it has a P/E ratio of 16.6, and a forward P/E ratio of 14.2. Five-year annual EPS growth forecast is 12.1%. It has no dividend policy, while the profit margin (4.4%) is way lower than the industry average of 11.9%.

Target price is $74.92, which implies a 18.6% upside potential. The stock is trading 15.80% lower than its 52-week high, while it returned 10.6% in a year. O-Metrix score is 3.92. Insiders own only 0.01% of the stock, whereas insider transactions for the last six months have decreased by 17.27%. SMA20 and SMA50 are -1.12% and -2.85%, respectively. SMA200 is -6.40%. Insiders have been exercising options and selling stocks for some time. Operating margin (6.9%) and profit margin are moderate red flags. Gross margin is 28.6%. While ROA is 7.54%, ROE is 14.72%. PEG value is 1.2. Analysts give a 1.7 rating for Henry Schein (1=Buy, 3=Sell). Moreover, it has a three-star rating from Morningstar. Holding is OK, but buying would not be the right move, in my opinion.

That [Vodafone] is exactly the stock I want to buy. It has a good yield. It has a strong business.

Vodafone shows a trailing P/E ratio of 10.8, and a forward P/E ratio of 8.53, as of the September 26 close. Analysts expect the company to have a -5.50% annualized EPS growth in the next five years, while the stock had a 4.12% EPS growth in the last five years. With a profit margin of 17.4%, and a dividend of 7.56%, Vodafone is an attractive stock for dividend lovers.

Vodafone has an O-Metrix score of 1.06, and it is trading 11.62% lower than its 52-week high. Target price is $33.06, indicating an about 30.1% upside movement potential. Vodafone returned 0.1% in the last twelve months, and debt-to assets ratio is nearly stable since 2009. Debt-to equity ratio is 0.4, far better than the industry average of 3.1. Profit margin and debt-to equity ratio are trustworthy green flags. Moreover, it has a four-star rating from Morningstar. Vodafone is relatively less correlated with the current euro zone situation, and it might be rewarding to hold this stock.

As DuPont is going for a 4% yield, Cramer is bullish on this Delaware-based stock. DuPont was trading at a P/E ratio of 11.2, and a forward P/E ratio of 8.9, as of the September 26 close. Estimated annualized EPS growth for the next five years is 9.20%, which sounds reasonable when its 9.64% EPS growth of past five years is considered. With a profit margin of 9.6%, DuPont offers a 3.95% dividend.

The stock is currently trading 25.91% lower than its 52-week high, while it returned -8.4% in a year. O-Metrix score is 6.54. Earnings increased by 70.69% this year, and institutions own 0.12% of the stock. Target price is $59.50, implying a 43.2% increase potential. Debt-to equity ratio is 1.1, which crushes the industry average of 5.2. Assets are increasing since 2006, while debts are unstable. ROE is 33.30%. 9 out of 16 analysts recommend buying, and average analyst rating for DuPont is 1.4 (1=Buy, 3=Sell). I guess this stock should be considered as a good buy.

Source: Latest Buy And Sell Ideas From Jim Cramer