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During the recent editions of Lighting Round on his Mad Money program, Jim Cramer was bullish on several stocks including KLA-Tencor (NASDAQ:KLAC), Spectra Energy (NYSE:SE), Plains All American Pipeline (NYSE:PAA) and Monster Beverage (NASDAQ:MNST). However, my analysis results, presented in this article, paint a different picture. I would advise avoiding these stocks at current levels (as of March 16, 2012).

Some basic information about these companies is presented in the table that follows:

PAA

MNST

KLAC

SE

Market Cap (Billion)

12.37

10.38

8.67

20.88

Stock Performance 5 Yr

42%

253%

0%

28%

Stock Performance 1 Yr

27%

7%

13%

22%

Dividend Yield

5.2%

0.0%

2.7%

3.5%

The four firms have very similar market capitalizations ranging from $8 billion to $21 billion. PAA offers an excellent yield at current levels. KLAC and SE also offer respectable dividend yields. MNST which was formerly known as Hansen Natural does not pay a dividend at this time. The investors in MNST have not lost out however with the stock up 253% over the last 5 years. PAA and SE have also generated positive returns while KLAC was a market laggard with the stock flat during this time period.

Next, I evaluated the historical growth rates of revenue, income and EPS, and the projected growth rates. These are summarized in the table shown below:

Growth Rates

PAA

MNST

KLAC

SE

Revenue

10 Year

15%

34%

7%

-10%

5 Year

11%

23%

9%

3%

1 Year

32%

31%

74%

8%

Income

10 Year

31%

58%

14%

1%

5 Year

28%

24%

16%

-1%

1 Year

91%

35%

275%

13%

EPS

10 Year

14%

54%

16%

4%

5 Year

11%

25%

20%

11%

1 Year

103%

34%

279%

12%

Growth Projections

Next Year

3%

19%

7%

7%

Next 5 Year

10%

15%

10%

7%

KLAC had a great last year with revenues up 74% and EPS growing by 279%. Next year, the growth rate is expected to be a more ground to earth 7%. PAA also had a respectable 2011 with earnings doubling during the course of the year. MNST was the most consistent and impressive among the companies on this list and is expected to continue to outperform the other companies over the next 5 years in terms of earnings growth.

Having analyzed the historic and projected growth rates, I looked at the operational metrics such as return on invested capital and capital expenditures as a percentage of sales. The table that follows presents the evaluation results.

Operations

Averages

PAA

MNST

KLAC

SE

ROIC

10 Year

6%

37%

9%

5%

5 Year

5%

35%

8%

6%

Last Year

7%

32%

24%

6%

TTM

7%

32%

22%

6%

Capex/Sales

10 Year

1%

1%

3%

5%

5 Year

2%

2%

2%

6%

Last Year

2%

2%

2%

6%

TTM

2%

2%

2%

6%

PAA and SE have both either maintained or increased their ROIC over the last 10 years. MNST has historically delivered an impressive return on invested capital. However, this important metric has declined over the last 5 years. All the companies have done a good job in maintaining their capex as a percentage of sales.

Having developed a good idea about the fundamentals of the 4 companies, the next step was to perform relative valuation. The multiples used in the analysis were based on historical analysis of individual company and industry multiples.

The table below presents the valuation analysis results.

Valuation

PAA

MNST

KLAC

SE

Current Yr Proj EPS

$4.73

$2.28

$4.48

$2.03

EPS Growth Rate

10%

15%

10%

7%

Future EPS (5 Yr)

$6.34

$3.47

$6.19

$2.67

Expected P/E

17.5

26

15

14

Price 5 Yrs Out

$110.87

$90.16

$92.83

$37.43

Unlevered Beta

1.27

0.85

2.2

0.43

Lt D/E

83%

0%

26%

122%

Current Tax Rate

35%

35%

35%

35%

Levered Beta

1.95

0.85

2.57

0.77

Risk Free Rate

2%

2%

2%

2%

Risk Premium

6.00%

8.00%

6.00%

6.00%

Size Premium

0.62%

0.62%

0.62%

-0.36%

Cost of Equity

14.3%

9.4%

18.1%

6.3%

Fair Value

$56.71

$57.48

$40.48

$27.62

Current Price

$79.49

$59.54

$51.99

$32.06

% Overvalued

29%

3%

22%

14%

* - Prices as of March 16, 2012

As shown in the table above, PAA, KLAC and SE are significantly overvalued while MNST trades at a modest premium. I would avoid these companies at current levels. I have owned MNST in the past and will look to re-initiate a position if and when the stock trades at a discount to fair value.

Disclaimer: Kindly use this article for information purposes only. Please consult your investment advisor before making any investment decision.

Source: 4 Recent Cramer Stock Picks To Avoid