4 Buy And 2 Sell Ideas From Jim Cramer

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 |  Includes: CAT, CHD, ETFC, PBI, TEVA, USB
by: Efsinvestment

The U.S. markets send mixed signals in the last week. The late Friday gains partially compensated for the week's losses. Jim Cramer, the Mad Money host was surprisingly bearish on Wednesday, making quite a blacklist in the Lightning Round segment. Interestingly, while Jim Cramer was bearish on Wednesday, he turned to be bullish on Thursday, behaving like “Jim as we know” again. He made four bullish and two bearish calls that are worth analyzing further. I have investigated six of Jim Cramer’s December 15 Lightning Round calls, and added my opinion about them. I have examined these mentions from a fundamental perspective, and applied my O-Metrix Grading System where possible. Here is a fundamental analysis of these six stocks from Cramer's December 15 Lightning Round:

Stock Name

Ticker

Cramer's Suggestion

O-Metrix Score

My Take

Teva Pharmaceuticals

(NYSE:TEVA)

Buy

9.51

Buy

Pitney Bowes

(NYSE:PBI)

Avoid

5.14

Avoid

E*Trade Financial

(NASDAQ:ETFC)

Avoid

4.61

Avoid

US Bancorp

(NYSE:USB)

Buy

5.01

Buy

Church & Dwight

(NYSE:CHD)

Buy

3.29

Buy After Pullback

Caterpillar

(NYSE:CAT)

Buy

10.25

Buy

Click to enlarge

(Data obtained from Finviz/Morningstar, and current as of December 16. You can download the O-Metrix calculator here.)

Teva (TEVA)

Cramer believes that Teva has finally bottomed, and that it will start going higher. The stock has a trailing P/E ratio of 12.7, and a forward P/E ratio of 7.5. Analysts expect the company to boost its earnings by 17.6% in the next five years. It pays a 1.62% dividend, and profit margin is 17.7%, way above the industry average of 10.6%.

Teva is trading at the lowest level of its P/E ratio, and it seems to have a good support at $35. Earnings-per share (ttm) and dividend yield are at their highest levels, as well. Yields seem all right, along with assets and cash flow. Debt-to equity ratio (0.2) is also convincing, which crushes the industry average of 4.1. Teva is a great bargain as it is trading seven times forward earnings. It seems that Teva has already bottomed, and a year-end rebound is on the horizon. Just keep in mind that the Relative Strength Index (67.98%) is very close to the 70% barrage. Teva has an A Grade O-Metrix score of 9.51.

Pitney Bowes (PBI)

Pitney Bowes’ revenue has no growth, and the Mad Money host is concerned about this name. The Connecticut-based company is trading at a P/E ratio of 9.9, and a forward P/E ratio of 8.4. Five-year annual EPS growth forecast is 1.3%. It offers an 8.12% dividend, while the profit margin is 7.9%.

Pitney Bowes has very poor numbers, and it is suffering from sell-offs. Insiders hold only 0.02% of the shares, while revenue and assets are decreasing for a long time. Pitney Bowes is doing quite bad since February 2007, losing more than 60% of its value since then. Debt-to equity ratio (55.1) is another hopeless number, crushed by the industry average of 3.0. I don’t know how long this stock will sustain its dividend, but don’t expect much from the stock. Despite the low P/E and high yield, the company will keep struggling to survive. The stock has a negative book value, yet the management keeps paying dividends. I mentioned this problem four months ago, and bears seem to have majority now. Based on these numbers, Pitney Bowes has an O-Metrix score of 5.14.

E*Trade Financial vs. U.S. Bancorp (ETFC)

Cramer isn’t recommending any financial except from U.S. Bancorp, so he made a bearish call on E*Trade. Here is a brief comparison of these two stocks, current as of Dec. 16:

E*Trade

U.S. Bancorp

P/E ratio

15.5

11.0

Forward P/E ratio

10.5

9.8

Estimated EPS growth for the next 5 years

12.0%

8.5%

Dividend yield

-

1.94%

Profit margin

6.7%

23.6%

Gross margin

-

-

Upside movement potential

41.3%

14.8%

Click to enlarge

U.S. Bancorp (USB) is much more trustworthy and consistent due to its size. Its profit margin keeps increasing since July 2009, as well as EPS (ttm). U.S. Bancorp has cut its dividend from $0.43 to $0.05 a share in March 2009, but gave a 160% boost after two years. Assets and cash flow seem all right. E*Trade is skydiving since August of this year, so play on U.S. Bancorp instead. O-Metrix scores of E*Trade and U.S. Bancorp are 4.61 and 5.01, respectively.

Church & Dwight (CHD)

Cramer is pretty bullish on this company:

Talk about a company that is right. That is a consumer products company with its costs under control. Buy, buy, buy.

The New Jersey-based company is trading at a P/E ratio of 22.2, and a forward P/E ratio of 18.2. Analysts expect the company to have an 11.8% annualized EPS growth in the next five years. It sports a 1.52% dividend, and the profit margin is 11.0%, slightly below the industry average of 11.6%.

Church & Dwight is the least volatile among its peers with a Beta value of 0.34. Revenue and cash flow seems admirable. Debt-to equity ratio (0.1) is another good sign, which crushes the industry average of 1.4. Earnings per share (ttm) is consistent. Church& Dwight is relatively small, but its growth is truly breathtaking. The company didn’t even suffer much from the Lehman disaster. It was only in 1999 when the stock had a considerable downfall. They have enough cash to make acquisitions, which eases the management team’s hard work. Besides, Church& Dwight itself seems a target for a takeover. The company has reached its 52-week high, so buy this name after a pullback. Based on these numbers, the company has an O-Metrix score of 3.29.

Caterpillar (CAT)

The Mad Money host suggests taking an “18-month perspective” if you’re going to own Caterpillar. The farm machinery maker shows a trailing P/E ratio of 13.4, and a lower forward P/E ratio of 9.7. Estimated annual EPS growth for the next five years is 21.6%. It offers a 2.10% dividend, while the profit margin is 7.8%, above the industry average of 6.7%.

Caterpillar’s earnings-per share is going straight up since January 2010. Dividends are just fine. Revenue and cash flow are very strong. Third quarter results were truly excellent, which gave the stock a push. As far as I see, Caterpillar is poised for a bounce. Caterpillar is a leading company in its industry, and it will stay as a winner as long as it operates in emerging markets. This stock is another bargain, trading nine times forward earnings. The current price is okay to jump in. Caterpillar has a whopping O-Metrix score of 10.25.

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