Maybe you can help me here. The chart shows 12x cash flow as a trend line. Does VL say that is fair value?
in the box on the left where they have 2015-2017 projections, price is 60-90$. . Cash flow per share is projected to be $6 in that year range. So thats 10x to 15x cash flow for the low and high range. And is 12x that fair value?
I was talking about the fair value projections by VL not the historical data. I find VL extremely useful for many things. the ability to page through so many companies quickly with data presented concisely in one page. I was only talking about their 2015 price targets which i find optimistic for some of the companies i have looked at.
"While you rely on fundamentals there has been little or no effort to explain why the stock has declined nearly 5x the S&P 500 since peaking at $50. " -- every stock movement does not need addressing to. It may well be that BKE was fully valued and with the market correction, it fell more than other stocks.
"Yahoo!Finance says that the stock has a beta of 0.96 and Value Line Investment Survey says that BKE has a beta of 1.05. This should be raising alarm flags when two different sources indicate a relatively low beta and the stock is moving contrary to the data by such a wide range."
This is funny. If a stock has beta 1, does it mean God has said that the stock cannot move more? Is that a big deal? The moves are the reason there are opportunities to buy and sell based on fundamentals combined with future outlook. If every stock was to move as indicated by beta, then it would be no fun.
i do not use VL for arriving at fair value. In many cases, i feel their values are very optimistic.
I understand need to plan for downside risk. But there was no discussion on margins / sales or anything that may cause this. Just a random price seemingly pulled out of the hat or resistance lines.
I would love a $24 price too..anything is possible but i would probably be buying before that.
Forget the Buffett commentary. I just found the comment weird. I have never heard of Edson Gould. However, given the article was presenting fundamental discussion, i felt the comment was odd. But, i am no one to judge that. So, i will refrain from that in the future.
Can you explain "Based on Edson Gould Speed Resistance Lines, the stock declines to 2/3 of the prior high as was the case from the 5/98 peak to the 2000 low. The $24.47 level is the initial downside target while $16.68 is the extreme downside target." so that i am a bit more enlightened.
2/3 of all time high which was $50 ? So $33?
Are you saying the move in the stock price will mimic a prior move? Or even the same price ranges? ( even though the company has increased sales / profits / cash flows/ cash on balance sheet / store count since 2000...?)
If you do understand values, why are you referring purely to price action rather than discussing valuation of BKE at those suggested price levels? Why don't we start with Market Cap at $24 ?
Let me take a shot. Market Cap $24 * 48 = $1150m Cash = $220m ($4.5 a share in cash) EV = $930m at $24
Cash from Ops in 2011 = $210m FCF = $170m. ( $3.5 in FCF/Share) Dividends = $2.85 a share (assuming $2 in special divdends). Can they pay $2. Well with $4.5 in cash and $3 in FCF a share, they can.
EV/FCF = 5.5x (if BKE were to trade at $24)
Yes, $24 is very attractive. It may get there...but ill be considering a buy much earlier than $24. I understand everyone looks differently at each stock and margin of safety/ discount to fair value. However, arbitrary or past price movements are not an indication I use to arrive at purchase prices.
If life was so easy as "Based on Edson Gould Speed Resistance Lines, the stock declines to 2/3 of the prior high as was the case from the 5/98 peak to the 2000 low."....then Edson Gould would be more famous than Warren Buffett!!
Do you know that at $16, the dividend yield would be 2.8/16 = 17.5% Do you know how much FCF is produced by this company and the cash on the balance sheet and what those numbers would be in relation to the market cap currently or at $16??
Kohl's: An Extremely Shareholder Friendly Company [View article]
Fair enough. They may come short of that target. However, the share count keeps dropping and next years income will be based on 220-225 million shares. If the stock remains low, management can continue their $1b buyback a year and/or raise the dividend 10% a year. With the savings from the buyback, the same $ amount can pay a higher $ dividend per share on the reduced share count. At some point, we get a higher multiple 12/13x ? 3% top line growth with that kind of buybacks eventually should do a lot of good.
Kohl's: An Extremely Shareholder Friendly Company [View article]
Excellent piece.
Just one question on this line "That may be tough to reach. Kohl's did $2.58 in EPS the 2nd half of 2011, which means that it will have to show 18% growth in EPS in the second half of 2012 compared with the year before." --- the share count is down by about that 18% from last year, so does it need to grow EPS other than by the share count dropping..? (and its buying more shares this year too. Could end at 225m shares)
Healthcare Trust Of America: Breaching Liquidity And Transparency By Going Public [View article]
Another excellent post Brad. The title seemed a bit misleading but i read the entire post and its well written . thanks for sharing.
I see it similar to ARCT listing and doing a tender.
Few questions. They have 4 classes of shares. Is only A listed and tradeable right now? The presentation on their site mentions a lockup and availability every 6 months for 25% shares.
"One risk, however, is that the company blows its cash balance and/or future cash flow on a poor acquisition. For example, the company spent $380 million in 2009 to buy a company at 3x revenue that is still unprofitable."
This is a prime reason I would not do an ex-cash valuation for them. And no dividend either. If i see the share count in VL, I dont see a major drop over a decade.
So, just on the FCF, does it appear cheap by itself...right now?
Is Nathan's Famous Going To Be Taken Private? [View article]
Hi,
thanks for posting this. interesting.
I did participate in the tender as a special situation. I like the balance sheet and ROIC. However, coming to valuation, I estimate EBIT as $8m or so. I came up with a $26 price. However, I understand there will be a premium for taking full control. So, one may well see that $30plus that you mention. However, I cannot invest with that hope. So, in that case I would want to buy below $20.
Still Big Money Left To Be Made In Big Lots [View article]
Big Lots is not expensive but its not dirt cheap either. its a reasonable valuation for the earnings growth. Most of the growth is coming from aggressive share buybacks. In 2006, there were 114m shares. Today there are 65m shares. Company bought back 15% of shares just last year.
Top line growth is slow 2-3% a year. However, operational improvement have resulted in margin improvement drastically since 2006.
I bought it last year at $32 and still holding a decent position. I wrote about it my letter ( http://bit.ly/HiSTqM ) See the last page if you want to skip to the Big Lots discussion.
The Buckle Is On Sale [View article]
in the box on the left where they have 2015-2017 projections, price is 60-90$. . Cash flow per share is projected to be $6 in that year range. So thats 10x to 15x cash flow for the low and high range. And is 12x that fair value?
The Buckle Is On Sale [View article]
The Buckle Is On Sale [View article]
"Yahoo!Finance says that the stock has a beta of 0.96 and Value Line Investment Survey says that BKE has a beta of 1.05. This should be raising alarm flags when two different sources indicate a relatively low beta and the stock is moving contrary to the data by such a wide range."
This is funny. If a stock has beta 1, does it mean God has said that the stock cannot move more? Is that a big deal? The moves are the reason there are opportunities to buy and sell based on fundamentals combined with future outlook. If every stock was to move as indicated by beta, then it would be no fun.
i do not use VL for arriving at fair value. In many cases, i feel their values are very optimistic.
The Buckle Is On Sale [View article]
I would love a $24 price too..anything is possible but i would probably be buying before that.
The Buckle Is On Sale [View article]
Can you explain "Based on Edson Gould Speed Resistance Lines, the stock declines to 2/3 of the prior high as was the case from the 5/98 peak to the 2000 low. The $24.47 level is the initial downside target while $16.68 is the extreme downside target." so that i am a bit more enlightened.
2/3 of all time high which was $50 ? So $33?
Are you saying the move in the stock price will mimic a prior move? Or even the same price ranges? ( even though the company has increased sales / profits / cash flows/ cash on balance sheet / store count since 2000...?)
If you do understand values, why are you referring purely to price action rather than discussing valuation of BKE at those suggested price levels? Why don't we start with Market Cap at $24 ?
Let me take a shot.
Market Cap $24 * 48 = $1150m
Cash = $220m ($4.5 a share in cash)
EV = $930m at $24
Cash from Ops in 2011 = $210m
FCF = $170m. ( $3.5 in FCF/Share)
Dividends = $2.85 a share (assuming $2 in special divdends). Can they pay $2. Well with $4.5 in cash and $3 in FCF a share, they can.
EV/FCF = 5.5x (if BKE were to trade at $24)
Yes, $24 is very attractive. It may get there...but ill be considering a buy much earlier than $24. I understand everyone looks differently at each stock and margin of safety/ discount to fair value. However, arbitrary or past price movements are not an indication I use to arrive at purchase prices.
Thanks
Adib
The Buckle Is On Sale [View article]
Do you know that at $16, the dividend yield would be 2.8/16 = 17.5%
Do you know how much FCF is produced by this company and the cash on the balance sheet and what those numbers would be in relation to the market cap currently or at $16??
Kohl's: An Extremely Shareholder Friendly Company [View article]
Kohl's: An Extremely Shareholder Friendly Company [View article]
Just one question on this line "That may be tough to reach. Kohl's did $2.58 in EPS the 2nd half of 2011, which means that it will have to show 18% growth in EPS in the second half of 2012 compared with the year before." --- the share count is down by about that 18% from last year, so does it need to grow EPS other than by the share count dropping..? (and its buying more shares this year too. Could end at 225m shares)
Healthcare Trust Of America: Breaching Liquidity And Transparency By Going Public [View article]
I see it similar to ARCT listing and doing a tender.
Few questions. They have 4 classes of shares. Is only A listed and tradeable right now? The presentation on their site mentions a lockup and availability every 6 months for 25% shares.
Logitech Looks Cheap [View article]
"One risk, however, is that the company blows its cash balance and/or future cash flow on a poor acquisition. For example, the company spent $380 million in 2009 to buy a company at 3x revenue that is still unprofitable."
This is a prime reason I would not do an ex-cash valuation for them. And no dividend either. If i see the share count in VL, I dont see a major drop over a decade.
So, just on the FCF, does it appear cheap by itself...right now?
thanks
Adib
Is Nathan's Famous Going To Be Taken Private? [View article]
thanks for posting this. interesting.
I did participate in the tender as a special situation. I like the balance sheet and ROIC. However, coming to valuation, I estimate EBIT as $8m or so. I came up with a $26 price. However, I understand there will be a premium for taking full control. So, one may well see that $30plus that you mention. However, I cannot invest with that hope. So, in that case I would want to buy below $20.
thanks
Adib
Still Big Money Left To Be Made In Big Lots [View article]
Top line growth is slow 2-3% a year. However, operational improvement have resulted in margin improvement drastically since 2006.
I bought it last year at $32 and still holding a decent position. I wrote about it my letter ( http://bit.ly/HiSTqM ) See the last page if you want to skip to the Big Lots discussion.
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http://bit.ly/HkosGj
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it would help if you provide some valuation related metrics, ROIC, FCF etc...
thanks