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Edward Vranic, CFA

 
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  • Investors Are Underestimating Perion
    Mon, Dec. 22 PERI Comment!

    Summary

    • Changes to Google Chrome have unfavorably impacted Perion in 2014 as its stock price has declined by nearly two-thirds.
    • Perion has made all the moves necessary to compete in this changing industry including stockpiling cash and aggressively cutting costs.
    • Perion's P/E and EV/EBITDA are well below industry averages so investors who believe that the company can navigate through these tough times will be buying a very cheap stock.
  • Taser Wins A Contract, So Why Would Digital Ally Spike?
    Sun, Dec. 21 DGLY 14 Comments

    Summary

    • TASR announced a five-year deal with the LAPD for wearable cameras, which caused both it and DGLY to spike in price.
    • Government red tape won't stop the trend toward body cameras for officers as TASR has shown it can save police departments money in the long run.
    • There is misleading and false information about DGLY's wearable cameras being inferior to TASR's.
    • DGLY's equipment and product specs are superior when comparing each feature.
    • TASR's equipment is less expensive, but DGLY doesn't require police forces to sign a contract for its evidence management service so, overall, DGLY's solution is less costly.
  • Fonar Is An Unusual And Undervalued Play On The Obesity Epidemic
    Mon, Dec. 8 FONR 3 Comments

    Summary

    • Fonar's upright MRI is designed to handle overweight individuals in a more comfortable setting than a traditional MRI scanner.
    • FONR trades at a 50% discount compared to larger medical device manufacturers.
    • Fonar is too small to effectively market its differentiated and often superior MRI scanners. It's a prime buyout target for one of the larger players in the industry.
    • The CEO has nearly 100% control over the company and may have his own agenda that doesn't align with the desires of minority shareholders to maximize the company's value.
    • The mediocre performance of Fonar's service centers and poor collection rates for Q1 may be hurting investor confidence and causing the low stock price.
  • Concurrent Computer Corporation Appears To Be A Value Trap
     • Thu, Dec. 4 CCUR 11 Comments

    Summary

    • Concurrent Computer Corporation has a high dividend, low P/E and reasonable revenue growth.
    • Revenue growth seen in 2014 is unlikely to continue as cable companies cut capital costs and government defense spending is inconsistent.
    • The dividend appears unsustainable as the payout ratio is nearly 100% and will eat into cash reserves going forward if kept.
    • Most of the earnings in 2014 are due to a release of a tax valuation allowance.
  • The Federal Government's Spending Announcement On Wearable Cameras For Police Sends Security Companies Soaring
    Wed, Dec. 3 TASR, DGLY 28 Comments

    Summary

    • The U.S. Federal Government announced a $75 million program over the next three years for wearable cameras for police officers.
    • The recent Ferguson shooting sparked this spending, but I assume that there will be much more government spending on this initiative in the United States and worldwide.
    • TASR, DGLY and ISNS already have moved up a lot since the event in mid-August, can the higher spending justify further price increases?
  • CNinsure Has More Cash Than Its Market Cap And Double-Digit Revenue Growth
    Mon, Dec. 1 CISG 3 Comments

    Summary

    • A failed takeover bid and concern over inflated profit numbers caused CNinsure's market cap to drop below its working capital in 2011.
    • Three years later CNinsure has settled a lawsuit regarding any alleged impropriety and no additional claims of fraud have been made against the company.
    • When comparing CNinsure's valuation metrics to China Life Insurance Company Limited, it shows the stock price is under-priced by at least 50%.
    • The CEO has shown a willingness to use excess funds to increase shareholder value, though was vague on how that will be accomplished.
  • Global Brass And Copper Holdings Is A Cheap Play On The Housing Market
    Fri, Nov. 28 BRSS 2 Comments

    Summary

    • BRSS is a producer of finished goods and inputs to many industries, housing included.
    • Valuation metrics including P/E and EV/EBITDA show that it is up to twice as cheap as homebuilders and similar types of companies.
    • Revenue has declined in 2014, but Q3 saw an increase in profits and flat revenue. Improvements in housing and automotive markets led to the turnaround.
    • BRSS is highly leveraged, but debt is not due for five years. If investors expect long-term economic growth, BRSS is a bargain stock.
  • Alibaba Exploded: Should Other Chinese Stocks Follow?
    Wed, Nov. 26 BABA 32 Comments

    Summary

    • Since its IPO, Alibaba has gained $113 billion in market cap.
    • Alibaba isn't overvalued compared to other internet stocks, but is overvalued compared to other Chinese stocks that stand to benefit from growing eCommerce activity.
    • Either Alibaba drops to a level more comparable to other Chinese stocks or these other stocks rise as the fear of fraud is replaced with the prospect of high growth.
  • SinoCoking Is Very Undervalued If You Believe Its Claims
    Wed, Nov. 26 SCOK 20 Comments

    Summary

    • SinoCoking claims it is producing and selling syngas at a clip of $83K in revenue per day.
    • If it meets eventual project targets, the stock price upside is well over 1000%.
    • The company's press releases appear "too good to be true" which raises questions of potentially fraudulent behavior.
    • The company has stood by its statements over the past few months, up to reporting revenue, production figures and customers on Tuesday's news release.
    • While company statements may not be fraudulent, they still may be overly optimistic. I am long with a small amount of shares and encourage investors to be cautiously bullish.
  • MetLife May Be One Answer For Investors Searching For Value In This Market
    Fri, Nov. 21 MET 6 Comments

    Summary

    • While the market at large has been getting pricey, MetLife remains at the lower end of its historical P/E range.
    • MetLife's dividend yield is higher than it has ever been and yearly dividend growth appears sustainable.
    • Investment gains/losses bring volatility to the numbers, but core revenues have had steady growth.
    • I expect MetLife to rise to $65 next year in a bullish market while outperforming the market in case it turns bearish.
  • AGCO Appears Cheap, But Can It Recover In 2015?
    Fri, Nov. 21 AGCO 7 Comments

    Summary

    • AGCO appears to be a cheap stock in a defensive agricultural industry that should see steady long-term growth as the world's population rises.
    • The company has had a difficult 2014 as have its competitors, but Q3 was particularly harsh on revenue and gross margin.
    • The balance sheet is not over-leveraged and AGCO should be able to navigate through this period of weakness before the next growth stage.
    • Investors have an opportunity to "buy low" now, but a good chance to "buy even lower" in 2015 before recovery in the longer-term.
  • WWE's Narrow-Minded Focus Is Alienating Fans And Investors
    Thu, Nov. 20 WWE 6 Comments

    Summary

    • WWE is pushing the WWE Network in an effort to follow a business model similar to Netflix.
    • This business decision is cannibalizing higher margin revenues, driving the company from a profit to a loss even as it downsizes and cuts costs to produce its content.
    • WWE Network is having problems gaining traction as it doesn't have enough content to keep users engaged.
    • Further declines in profits should be expected as WWE offers cheap/free price plans to stimulate growth.
    • Jim Cornette, a veteran of the wrestling business, believes that pro wrestling is dying. Ominous words for a company that achieves all of its revenues from wrestling.
  • CarMax Makes An Excellent Long-Term Short If The Economy Eventually Heads South
    Thu, Nov. 20 KMX 1 Comment

    Summary

    • CarMax is a highly-levered business which carries most of its assets in auto inventory and loan receivables.
    • The company is valued more aggressively than industry peers.
    • To maintain revenue growth, it will continue to have to extend credit and perpetually increase its loan receivable and payable balances.
    • At some point in time the economy will head into recession and Carmax will be at risk of not collecting on portions of its loans.
  • Sherwin Williams Is A Strong Company With A Bubbly Valuation
    Wed, Nov. 19 SHW Comment!

    Summary

    • Sherwin Williams has a history of annual increases to its dividend that can be matched by few other companies.
    • The market has "over-rewarded" SHW for its consistent earnings and dividend growth as it sits at the top end of plausible valuations for a paint company.
    • Despite constant increases to the dividend, yield sits at the low for this century as the stock price has gone on too much of a tear.
    • Cash and working capital have eroded substantially for 2014 so SHW may not have the cash reserves required to fulfill the share buy back program and substantially increase the dividend.
  • What's Inside Facebook's Oculus Rift? Investment Opportunity
    Mon, Nov. 17 FB 10 Comments

    Summary

    • Facebook has a vision for virtual reality, and will likely be aggressive in throwing development and investment dollars into the industry.
    • The VR market is estimated to become a $7 billion industry by 2018 with Facebook set up to be a dominant player for the hardware and content.
    • I agree with Mark Zuckerberg's view of VR's future marketability, but the critics of the early-stage technology are correct. New components will be built with corresponding investment needed.
    • Facebook's Oculus Rift is due to be released to the broad consumer market some time in 2015 alongside other VR devices within the next year.
    • Sophic Capital has identified several companies that build components of the Rift which will benefit from the consumer release and as new generations of the product are developed.
  • Lakeland Industries And Sharps Compliance Announce Spikes In Revenue From Ebola Threat
    Thu, Oct. 30 LAKE, SMED 38 Comments

    Summary

    • The Ebola threat has caused a significant increase in the business activities of Lakeland Industries and Sharps Compliance, as confirmed by company statements yesterday.
    • Lakeland Industries states that it has procured a total of one million protective suit orders so far, with accompanying equipment.
    • Sharps Compliance announced an increase in sales of its biohazard sales kit and very busy flu shot season for October during its quarterly conference call.
  • Owens Corning Hasn't Collapsed Yet, But The Warning Signs Are There
    Thu, Oct. 23 OC Comment!

    Summary

    • Owens Corning reports a "beat" on adjusted EPS, but that figure adjusts for negative one-time items and not positive one-time items. Actual EPS misses expectations.
    • Despite the supposed beat in earnings for Q3, management reduces guidance on full year outlook EBIT by $15 million, leaving questions as to the impact going into 2015.
    • The company has minimal cash balances to sustain the quarterly dividend or continue with the share buy back program.
    • Large increases to the receivables balance puts into doubt whether the company can collect on the money it is owed.
  • Is Owens Corning Headed For A Collapse?
    Mon, Oct. 20 OC 5 Comments

    Summary

    • Q3 earnings are out due out on the morning of October 22.
    • Owens Corning has had a recent trend of disappointing earnings.
    • The company has the potentially catastrophic combination of a leveraged balance sheet, thinning margins and stagnant revenues in a construction industry that's highly susceptible to macroeconomic variables.
    • Put option activity on the stock shows that investors and traders are expecting a price decline in the near-term.
  • Sharps Compliance Could Be The Next Big Gainer Due To Ebola Hysteria
    Tue, Oct. 14 SMED 8 Comments

    Summary

    • Lakeland Industries and Alpha Pro Tech have gone on huge runs thanks to the Ebola scare.
    • In addition to the wearing of hazmat suits and protective masks, the safe disposal of medical waste from Ebola will be a must.
    • Sharps Compliance is another Ebola fear play due to its role in removing medical and hazardous waste.
    • SMED may be the best play on Ebola fears right now as it is less overbought compared to LAKE and APT and has the strongest revenue growth.
  • Capitalizing On Chinese E-Commerce: Alibaba's IPO Should Spark Activity On Undervalued Chinese Stocks
    Wed, Oct. 8 CCCGY, CRWOY, DANG 3 Comments

    Summary

    • Alibaba's IPO shows that there is an appetite for Chinese stocks once again.
    • The eCommerce industry is strong and several supporting industries have been overlooked, providing a chance for investors to discover undervalued gems.
    • Companies in logistics, transportation and other related fields have great growth potential and trade at very cheap multiples.
    • Alibaba is trying to build its own logistics network and may look to purchase smaller players to build this network quickly.
    • Investors need to decide if they want to pay top dollar for Alibaba, or want to buy logistics companies at low prices which will also have strong growth.
  • Lakeland Industries May Be The Next Big Winner In The War Against Ebola
    Sun, Oct. 5 LAKE 88 Comments

    Summary

    • Lakeland Industries is a maker of hazmat suits, good for the protection against Ebola.
    • The U.S. State Department put out a bid for 160,000 hazmat suits, coinciding with the first reported case of Ebola in the U.S.
    • With a small share float, LAKE could have a similar speculative run as TKMR as investors look to gain on the war against Ebola.
  • Rogers Will Have A Difficult Time Attaining Wireless Operating Profit Growth
    Fri, Sep. 26 RCI 10 Comments

    Summary

    • Analyst targets for Rogers are based on growth in revenue and operating profits in 2015.
    • Any growth Rogers has seen in Wireless in the first half of 2014 is due to lower gross additions.
    • Rogers will have a very tough time increasing profits in 2015 thanks to the CRTC Wireless Code of Conduct.
    • Because of its larger subscriber base and higher churn, it will be at a disadvantage versus other carriers in dealing with the fallout from two-year contracts.
    • Once Rogers provides guidance for 2015, I believe analysts will reduce their EBITDA expectations and possibly their price targets on the company.
  • How To Create A Per Unit Model For Canadian Wireless Telecom Companies
    Fri, Sep. 12 RCI, BCE 3 Comments

    Summary

    • A per unit model can be used to judge the profitability of telecom companies of differing sizes.
    • Upfront costs like COA are amortized over the life of the client to give a fairer view of profitability for each quarter.
    • A per unit model can be easily created by using some of the publicly disclosed key performance indicators released on each company's quarterly report.
  • GoPro Is Priced For Perfection
    Tue, Sep. 9 GPRO 29 Comments

    Summary

    • GoPro appears to be a good company at a bad price.
    • Bullish investors are expecting the world of the company, and will very likely be disappointed as their expectations are not based on reality.
    • The business is in declining efficiency. 25,000 sales locations were used to support 3.85 million units sold in 2013 - 1 sale every 2.4 days per store.
    • The social media video sharing aspect to GoPro is an interesting one, but far too early to consider it a viable revenue stream.
  • How To Estimate Rogers' Cost Of Acquisition For Wireless
    Fri, Sep. 5 RCI 1 Comment

    Summary

    • A company's COA rate is a key metric to consider when analyzing the profitability of its wireless business.
    • Unlike its competitors, Rogers does not disclose its COA rate.
    • Rogers COA can be calculated up to 2010 and reasonably estimated thereafter.
  • Coca-Cola's Deal With Monster Implies A Valuation Of Up To $160 Per Share For Monster
    Mon, Aug. 18 MNST 8 Comments

    Summary

    • Coca-Cola is buying a 16.7% stake in Monster Beverage Corp. for $2.15 billion.
    • Coca-Cola is giving its energy drinks business to Monster, a division with over $1 billion in estimated annual sales.
    • Monster is giving its non-energy drinks business to Coca-Cola, a division with less than $200 million in annual sales.
  • If There Is Such A Thing As A Free Lunch In The Markets, Stans Energy's Favorable Settlement Comes Close
    Thu, Jul. 10 HREEF 101 Comments

    Summary

    • Stans Energy was awarded $118M in a settlement by the Arbitration Court at the Moscow Chamber of Commerce and Industry.
    • The market cap sits at just a fraction of the settlement amount, so the market doesn't think the company can collect, but presents significant upside potential for investors.
    • The Government of Ontario backs the legal claim so Stans should be able to collect on liquid assets worth the $118M.
    • Stans's situation leads to it becoming a buyout target.
    • Management needs to act quickly if the company doesn't want to be a target of a hostile takeover and wants its choice of assets as compensation.
  • Pacific Ethanol Is Poised To Make Big Profits In Q1 2014 As Corn Prices Continue To Decline And Ethanol Prices Spike
    Mon, Mar. 3 PEIX 12 Comments
  • The Canadian Small Cap Equity Markets Are In Crisis
    Wed, Feb. 19 FRWRF, NLPXF, SLXXF 9 Comments
  • Cytori Therapeutics Is A Cell Therapy Company With Several Positive Catalysts For 2014
    Mon, Feb. 10 CYTX 6 Comments
  • Chelsea Therapeutics May Be A Revenue Generating Biotech By The End Of 2014
    Thu, Jan. 16 CHTP 46 Comments
  • Alibaba's Looming IPO Shows That Smaller Players In The Chinese E-Commerce Industry Are Significantly Undervalued
    Dec. 12, 2013 BABA 14 Comments