Velti: A High-Growth, Low-Priced Winner? [View article]
James
Thanks for your comment and I agree he probably does. Though, I think it poor judgement.
If there is anything I have learned from being involved in the markets (and life for that matter) is that the future is not only unknown, it is unknowable. As a result a health margin of safety is in order. And the last thing you want to do is start raising money if you absolutely must. Plus they are in violation of the debt covenant (most likely debt to ebitda). An equity raise or shareholder loan would go a long way to assuage the bankers.
As a shareholder, the absolute worst thing that can happen is for a company you own shares in to run out of cash. And no doubt the next short attack against Velti will be based on fabricated rumors of impending bankruptcy. And given that insiders were trading on Q4 results a week before they were announced many shareholders would no doubt be convinced to sell by the rumors.
Forecasting Future Earnings Is The Key To Successful Stock Investing: Analyst Estimates Are A Starting Point [View article]
Great article. Agree that the analysts estimates are directionaly correct, that they don't need to be very accurate to be useful, and that short term estimates are generally guided by management and on average below actuals.
However, my experience is that long term estimates tend to be above actuals during bull markets and around actuals during bear markets.
Also estimates tend to be much better in mature sectors than in growth sectors.
Velti: A High-Growth, Low-Priced Winner? [View article]
I misjudged management, they are worse than I gave them credit for.
The company has burnt through cash much faster than I had anticipated (most of it due to poorly structured acquisitions).
It also raises questions. Why did they pay off the factoring arrangement last quarter? $15 million of cash, and then end up having drawn down the entire HSBC facility by the 2nd week of march and then break their debt covenant.
Why do they not raise at least $10 million via rights issue and share sales. Yes their will be dilution, but you don't run a public company on a 80% confidence that you will get through a period of tight cash flow (i.e. you could go bankrupt)? Instead of feigning shareholder dilution - shareholders would much prefer to see enough cash to get through any contingencies). Alternatively Alex should provide a shareholder loan of $10 million with a conversion price at $4.00.
If they had announced a 6 million share rights issue (currently they have 62 million shares diluted). Price drop would have been less than 10%.
Also this big customer, name unstated, (word on the street is T-Mobile) is now under review (or maybe lost?)
Velti: A High-Growth, Low-Priced Winner? [View article]
I have no insight into this quarters results, which will most likely drive short term performance.
My worst case scenario is that revenue will grow 30%, earnings will remain negative, and cash burn will be less than $5 million.
My best case is that revenue will grow 50%, earnings will be break even (i.e. zero) and cash burn will be between 0 and $2 million.
The worst case may result in price undercutting $3 in the short term, best case might see some price appreciation. But I'm not expecting to see north of $4 any time soon. Price will not better reflect value until it moves to positive EPS and positive cash flow.
In both cases DSOs should fall, but I think the market is beyond that. Nothing but earnings and cash will please the crowd.
I have already discounted this quarter. The CFO has to get costs and contracts under control. People always like issues to be sorted within one quarter, but in the real world things take longer.
Its a dollar store so gross margins will likely remain low.
Current gross margin around 35% is too low to support net margins much over 8%. And even if they can deliver 10% net margins, they will struggle to justify the valuation.
Nor is asset turnover any better than its comparison companies.
That said, it has momentum, accumulation and a breakout at $40. Animal spirits could easily take it beyond 50.
Magnachip: A Small Cap Semiconductor Stock Worth a Look [View article]
I'm just looking a MX for the first time. Why is so cheap? I read the article posted by cookiemonster, but prior bankruptcy is not enough of a stigma to keep its price so low? Is it?
I'm planning to sit down with its past years and quarterly financials over the next few days.
United Therapeutics Growing Drug Franchise [View article]
Hi Todd. Nice article. I am long United but only with a junior position and was considering whether to take profits or buy more.
What in your opinion will be the impact of the expiry of Remodullin patents on the medium term (2 to 3 year) profit growth.
Also what do you see as the market potential for UT-15C Treprostinil and Ch14.18 for Neuroblastoma.
United has been adding $30 to $50 million to its top line each quarter over the past five quarter, I'm trying to figure out what it can do over the next 3 years.
3D Systems: For Experienced Speculators And Momentum Players Only [View article]
A stock goes parabolic when the rate of price increase is itself increasing. If it went up 3% from 40 to 41.2 today and then up 5% to 43.3 tomorrow and then up 7% to 46 the day after. This will create a parabolic curve. it is easily recognized on a price chart, as a curve that is moving away from its trend line, rather than travelling parallel to it. Of the few things that are predictable in the market one of them is that parabolic rallies must fail, sooner rather than later.
Velti: A High-Growth, Low-Priced Winner? [View article]
Its good to see smart money taking an interest. Discovery Group specialise in investing in undervalued micro caps ($25 million to $500 million market cap) and have outperformed S&P by 7.4% since inception. Though like all of us some of their investments don't turn out positively.
Coincidentally there investment criteria mirrors mine. They are looking for:
Strategic Competitive Position Strong revenue growth High margins and cash flow Solid financial position Low market valuation
I am looking for: 1. High quality a. Competitive advantage b. High return on assets c. High margins d. Positive cash flow e. Strong balance sheet 2. Growth a. High revenue growth b. Strong growth drivers i. Low penetration into addressable market ii. Roll ups, with runways, or iii. Strong consumption growth 3. Value a. Low market valuation
Great minds think alike, whilst fools seldom differ. Take your pick.
Velti: A High-Growth, Low-Priced Winner? [View article]
Chances of Velti going bankrupt are slim, if you exclude the factoring purchase (which is a one off at $15 million) burn was $7 million. They have 30 million cash PLUS 35 million facility. 9 quarters before they run out of cash.
I think they plan to take on new risks, with acquisitions.
Velti: A High-Growth, Low-Priced Winner? [View article]
The CEO has made mistakes, as have many manager I have worked with or invested in. I have also made many management blunders. I don't believe he is inept. Though he in experienced at running a large public company.
If I were his chairperson or dominant investor I would give him the time to get better at it. Steve Jobs was inexperienced and Sculley was experienced, with hind sight who was the better CEO.
Yes he has been arrogant from time to time (again look at Steve Jobs).
Overreactions by investors without a long term view and the understanding of good managers and how they develop create opportunities for those who with a long term view.
Alex has been running this business for ten years, he has presided over a relatively successful global expansion, one pivot of the business model and the start up of the firm. Hardly inept.
Velti: A High-Growth, Low-Priced Winner? [View article]
The plan is to sell off some of the high DSO emerging market businesses. However the cash won't come for another 3 years. So yes it gets rid of the receivables but no cash in the short run.
Velti: A High-Growth, Low-Priced Winner? [View article]
Thanks for your comment and I agree he probably does. Though, I think it poor judgement.
If there is anything I have learned from being involved in the markets (and life for that matter) is that the future is not only unknown, it is unknowable. As a result a health margin of safety is in order. And the last thing you want to do is start raising money if you absolutely must. Plus they are in violation of the debt covenant (most likely debt to ebitda). An equity raise or shareholder loan would go a long way to assuage the bankers.
As a shareholder, the absolute worst thing that can happen is for a company you own shares in to run out of cash. And no doubt the next short attack against Velti will be based on fabricated rumors of impending bankruptcy. And given that insiders were trading on Q4 results a week before they were announced many shareholders would no doubt be convinced to sell by the rumors.
Velti: A High-Growth, Low-Priced Winner? [View article]
The issues at Velti are management related, not related to the market or Velti's position in it.
Forecasting Future Earnings Is The Key To Successful Stock Investing: Analyst Estimates Are A Starting Point [View article]
Agree that the analysts estimates are directionaly correct, that they don't need to be very accurate to be useful, and that short term estimates are generally guided by management and on average below actuals.
However, my experience is that long term estimates tend to be above actuals during bull markets and around actuals during bear markets.
Also estimates tend to be much better in mature sectors than in growth sectors.
Velti: A High-Growth, Low-Priced Winner? [View article]
The company has burnt through cash much faster than I had anticipated (most of it due to poorly structured acquisitions).
It also raises questions. Why did they pay off the factoring arrangement last quarter? $15 million of cash, and then end up having drawn down the entire HSBC facility by the 2nd week of march and then break their debt covenant.
Why do they not raise at least $10 million via rights issue and share sales. Yes their will be dilution, but you don't run a public company on a 80% confidence that you will get through a period of tight cash flow (i.e. you could go bankrupt)? Instead of feigning shareholder dilution - shareholders would much prefer to see enough cash to get through any contingencies). Alternatively Alex should provide a shareholder loan of $10 million with a conversion price at $4.00.
If they had announced a 6 million share rights issue (currently they have 62 million shares diluted). Price drop would have been less than 10%.
Also this big customer, name unstated, (word on the street is T-Mobile) is now under review (or maybe lost?)
Velti: A High-Growth, Low-Priced Winner? [View article]
My worst case scenario is that revenue will grow 30%, earnings will remain negative, and cash burn will be less than $5 million.
My best case is that revenue will grow 50%, earnings will be break even (i.e. zero) and cash burn will be between 0 and $2 million.
The worst case may result in price undercutting $3 in the short term, best case might see some price appreciation. But I'm not expecting to see north of $4 any time soon. Price will not better reflect value until it moves to positive EPS and positive cash flow.
In both cases DSOs should fall, but I think the market is beyond that. Nothing but earnings and cash will please the crowd.
I have already discounted this quarter. The CFO has to get costs and contracts under control. People always like issues to be sorted within one quarter, but in the real world things take longer.
3 Reasons To Avoid Five Below [View article]
Current gross margin around 35% is too low to support net margins much over 8%. And even if they can deliver 10% net margins, they will struggle to justify the valuation.
Nor is asset turnover any better than its comparison companies.
That said, it has momentum, accumulation and a breakout at $40. Animal spirits could easily take it beyond 50.
Magnachip: A Small Cap Semiconductor Stock Worth a Look [View article]
I'm planning to sit down with its past years and quarterly financials over the next few days.
United Therapeutics Growing Drug Franchise [View article]
What in your opinion will be the impact of the expiry of Remodullin patents on the medium term (2 to 3 year) profit growth.
Also what do you see as the market potential for UT-15C Treprostinil and Ch14.18 for Neuroblastoma.
United has been adding $30 to $50 million to its top line each quarter over the past five quarter, I'm trying to figure out what it can do over the next 3 years.
Thanks
3D Systems: For Experienced Speculators And Momentum Players Only [View article]
3D Systems: For Experienced Speculators And Momentum Players Only [View article]
Velti: A High-Growth, Low-Priced Winner? [View article]
Coincidentally there investment criteria mirrors mine. They are looking for:
Strategic Competitive Position
Strong revenue growth
High margins and cash flow
Solid financial position
Low market valuation
I am looking for:
1. High quality
a. Competitive advantage
b. High return on assets
c. High margins
d. Positive cash flow
e. Strong balance sheet
2. Growth
a. High revenue growth
b. Strong growth drivers
i. Low penetration into addressable market
ii. Roll ups, with runways, or
iii. Strong consumption growth
3. Value
a. Low market valuation
Great minds think alike, whilst fools seldom differ. Take your pick.
Velti: A High-Growth, Low-Priced Winner? [View article]
I think they plan to take on new risks, with acquisitions.
Velti: A High-Growth, Low-Priced Winner? [View article]
If I were his chairperson or dominant investor I would give him the time to get better at it. Steve Jobs was inexperienced and Sculley was experienced, with hind sight who was the better CEO.
Yes he has been arrogant from time to time (again look at Steve Jobs).
Overreactions by investors without a long term view and the understanding of good managers and how they develop create opportunities for those who with a long term view.
Alex has been running this business for ten years, he has presided over a relatively successful global expansion, one pivot of the business model and the start up of the firm. Hardly inept.
Velti: A High-Growth, Low-Priced Winner? [View article]
3D Systems: For Experienced Speculators And Momentum Players Only [View article]