Cramer's 5 Stock Picks From September 23

 |  Includes: CME, DNKN, MU, NKE, SBUX
by: Efsinvestment

Jim Cramer is making stock suggestions in his "Lightning Round" segment, as I have been writing about. He also talks about stocks apart from it, giving simple investors some tips to make money. Recently, he mentioned five stocks. He made three bullish and two bearish calls this time. 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 23 Mad Money:

Stock Name


Cramer's Suggestion

O-Metrix Score

My Take






Dunkin' Donuts


Buy, but alternative is better







Buy After Pullback

CME Group




Long-Term Buy



Top Pick


Buy After Pullback

Click to enlarge

(Data from Finviz/Morningstar and is current as of September 26 close. You can download O-Metrix calculator, here)

Although Cramer is bullish about tech stocks in general, Micron is an exception. He would “avoid it entirely.” It was trading at a P/E ratio of 11.0, and a forward P/E ratio of 10.9, as of September 26. Analysts expect the company to have an annual EPS growth of 11.5% in the next five years. Profit margin (7.1%) is way below the industry average of 19.1%, while it pays no dividend.

O-Metrix score of Micron is 5.25, whereas it is trading 45.86% lower than its 52-week high. Target price is $9.83, implying a 51.9% increase potential. Earnings increased by 178.68% this year, and it returned -8.3% in the last twelve months. The debt-to assets ratio is slowly decreasing since Q2 2010. Debt-to equity is 0.2, which crushes the industry average of 9.7.

On the other hand, earnings decreased by 91.94% this quarter. Insiders hold 0.48% of the shares, while operating margin is 13.6%. Gross margin is 24.3%. ROA and ROE are 4.45% and 7.92%, respectively. Operating margin, profit margin, and ROE are moderate red flags. While SMA50 is -0.96%, SMA200 is -27.91%. Sales decreased by 6.51% this quarter. Holding should do all right.

While Dunkin’ Donuts is a strong international growth story, Cramer would rather go with Starbucks, as it is “cheaper and better.” Here is a brief comparison between these two companies:

Current as of September 26 close.

Dunkin’ Donuts


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

As you see, Dunkin’ Donuts is no match for Starbucks. O-Metrix scores of Dunkin’ and Starbucks are 0.70 and 3.99, respectively. Dunkin’ is currently trading 8.83% lower than its 52-week high, while Starbucks is trading 6.73% lower. Morningstar gives a one-star rating for Dunkin, and a three-star rating for Starbucks. Dunkin’s debt-to assets ratio is increasing at extreme rates, while that of Starbucks is decreasing slowly. There is almost no indicator that Starbucks isn’t crushing Dunkin. Starbucks recently double-topped, therefore it is a good idea to wait for a pullback.

Cramer reiterated his bearish call on financials, which includes CME Group. The Illinois-based company, as of the September 26 close, shows a trailing P/E ratio of 14.5, and a forward P/E ratio of 13.3. Estimated annual EPS growth for the next five years is 14.5%, which sounds fair given the 10.19% EPS growth of past five years. It offers a 2.17% dividend, while the profit margin (37.6%) nearly doubles the industry average of 20.9%.

Target price is $334.16, which indicates an about 28.9% upside movement potential. The stock is trading 19.40% lower than its 52-week high, while it has an O-Metrix score of 5.99. Earnings increased by 15.30% this year, and institutions hold 70.13% of the shares. CME Group returned -1.8% in a year. Yields are great. Morningstar gives a four-star rating for the stock, whereas its debt-to assets ratio is slowly going down for the last five quarters. Gross margin and operating margin are 78.4% and 61.9%, respectively. PEG value is 0.9. I admire CME Group’s hard effort to heal itself after the Lehman disaster, and I guess it promises a much better future.

Nike is a “great senior growth story that will have multiple years of strength.” Nike has a P/E ratio of 20.2, and a forward P/E ratio of 15.8, as of September 26. Five-year annualized EPS growth forecast is 11.2%. With a profit margin of 10.2%, Nike paid a 1.40% dividend last year.

O-Metrix score of Nike is 3.50, while it returned 12.9% in a year. Target price implies a 10.7% upside potential, and it is currently trading only 5.06% lower than its 52-week high. SMA20 and SMA50 are 3.11% and 3.77%, respectively. SMA200 is 6.08%. Yields are consistent. Debts are far from being a threat, and analysts give a 1.4 recommendation for Nike (1=Buy, 3=Sell). While ROE is 21.77%, ROI is 20.46%. Nike is an excellent long-term buy, in my opinion. The earnings report surprised the analysts with FQ1 EPS of $1.36, which is 4 cents higher than analyst expectation. I think Nike will continue to be an outperformer. However, a pullback should be waited for.

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