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  • Southside Bancshares: Great Bank, Sold Off For Shortsighted Reasons [View article]
    Good comment: "There is very little correlation between all the demographic growth statistics that get strewn about and returns to shareholders." Point taken.

    Could you elaborate on this:

    "+ On what planet does the stock / cash mix of a deal materially change the pro forma valuation? By your "simple math", if SBSI were instead to pay 100% cash for OABC the valuation the pro forma valuation would balloon from ~$620mm to $770mm. Too bad its not that easy to create value."

    Thanks.
    May 20, 2014. 07:05 PM | Likes Like |Link to Comment
  • Cinedigm: GAAP Complexity Conceals A J-Curve Business Model In Its Cash Collection Phase [View article]
    It is worth nothing this sentence again:

    "An investor in Cinedigm, however, would be wise to watch share dilution over time as that presents one of the largest risks for the common stock. This is a real concern since the recent increase in market cap from around $40 million to the $75 million was entirely due to increases in shares outstanding rather than by an increase in the share price."

    The company has a very interesting position in the industry but continued share dilution could diminish the value of the company. As of Feb 10, 2014 the company had 64,565,196 shares outstanding compared with only 48,396,697 shares outstanding at June 11, 2013 -- 33% increase. Also, it is worth noting that an 8-K filed on 5/12/2014 reports the departure of the Principle Accounting Officer. It reads that "Mr. Brownson indicated that he did not have any disagreement with the company on any matter relating to its operation, policies or practices." Such a departure deserves some scrutiny. Further, the company is trying to sell more stock to the public. These things should be watched.
    May 18, 2014. 10:37 PM | Likes Like |Link to Comment
  • The Fresh Market Management Discusses Q4 2013 Results - Earnings Call Transcript [View article]
    foodman, you probably should read before you comment. For instance, you wrote:

    "Look at Trader Joes website and see future store openings in Florida (TFM strongest area 40 + stores)"

    Just scroll up and you will see they have only 35 locations in Florida. But you go on and write:

    "I project that in the next quarterly report TFM will report extremely low comp sales or possibly negative comps."

    They are obviously going to have bad results due to weather in Q1 but management said in the conference call:

    "The biggest impact to the quarter will come from comp store sales growth, which we expect to be at the low end of our full year guidance of 1.5% to 3.5%."

    You really think you have a better view than them? You then wrote:

    "My experience with TFM consist of visits in PA, Westchester NY and Woodbury NY. These are large stores with plenty of empty space and small quantity of product in display."

    Well, this is basically the model -- few high quality SKUs (for bargaining power and leverage) in small stores. I mean, that is the model. You then wrote the only intelligent part of your comment above:

    "The crew seems to be courteous but lack knowledge of the operation (lack of training) Crew members working at their respective stations while not interacting with customers."

    Yep, the company is supposed to be very service oriented so this is a valid criticism. You then wrote:

    "I do not see sales volume increases at these stores, mostly they are being use as a convenience store, very low basket size."

    In the conference call above, which you really ought to read sometime, management noted:

    "New stores and a 3.1% increase in comparable store sales supported top line sales, with average transaction size increasing 1.6% and transaction volume increasing 1.5%."

    Sigh, it is almost too easy to debunk your negativity. You finished off your comment with:

    "Their concept can be salvage by implementing customer training, merchandizing their produce section with large presentations with a corresponding price. People in general are amazed by visual presentation. I have plenty of additional suggestions, not enough space.
    If nothing changes The stock price of TFM will be halve by the November report."

    If the stock sells for $750 million (effectively half, as you note) the company would be offering an earnings yield (adjusting depreciation to maintenance capex) of around 12% or a PE of 8. Considering the company has grown revenues at around 16% for 8 years, such a PE would be very unlikely. Furthermore, the companies ROE is likely to stay above 25% for some time. I would love it if the stock sold for $16 bucks, but I doubt it will. Remember, they are also opening new stores... that will grow revenue and cash profits.

    Anyways, please read before you comment. Take care.
    May 16, 2014. 10:00 PM | 1 Like Like |Link to Comment
  • Cardinal Financial Is Expensive [View article]
    For future reference, this stock was trading at around $18.74 (market cap: $590m+) on April 3rd, 2014 when this article was published.
    May 14, 2014. 10:06 PM | Likes Like |Link to Comment
  • Analyzing Companies Is A Complex Affair: Don't Use EBITDA [View article]
    Hey Gaurv,

    It is because the academics have been teaching it for 30 years and it helps the investment bankers sell "inventory." It is completely idiotic to use -- it makes no sense, it is way too superficial, and it lacks any philosophic grounding to the accounting from which it is derived. We live in a very sad world. But idiots will be idiots and even if they didn't have this wrong theory they would believe some other another wrong theory. If EBITDA didn't exist, someone would think it necessary to invent. But remember it helps, most of all, investment banking houses.

    This is a crazy world my friend -- and one can never stress the "crazy" enough. Intellectual errors can persist for decades and decades. Think of the failed drug war, the idea that human beings are rational, the idea of rationality itself, the management idea of "shareholder value", alcohol prohibition, the idea that human labor is simply an expense on the IS, the new era theory, share buy backs in general, stock options in general, the error that we all need to go to college (just don't look at the bill), the idea of global cooling, the idea that impoverished people on social security are "takers" and not "makers", the idea that socialism will progress to communism, the price-to-sales ratios of today's bubble stocks, the notion that money equals speech not corruption (how we forgot about the corruption part is beyond me), the various religions claiming ultimate truth, the notion in economics that the fractional reserve banking system has the supply and demand characteristics of other industries (hint, it does not), or the notion that foreigners will stop using the US dollar. We humans make a lot of mistakes and, more interesting, we really don't have a track record of learning from them. In fact, there is some evidence that in the right circumstance DIS-CONFIRMING evidence INCREASES our subjective belief <-- that is about as crazy as crazy can get.

    While we live in a society where there is a presumable "consensus by agreement." We live in a world of group think. People self censor because they don't want to be different. People, further, don't like to think for themselves. They see EBITDA and assume since others are using it that its popularity somehow overcomes its extremely obvious intellectual short comings. What is funny is that EBITDA doesn't even approximate cash flow. I have seen very few cases where EBITDA actually approximates what it claims to approximate.

    My advice: use EBIT or operating cash flow. I don't think industry comparisons would be particularly useful since once you decide which company is best in an industry, you then would need to compare it with alternative investment options in other industries (at which point using EBITDA wouldn't make sense).
    May 9, 2014. 01:34 PM | 1 Like Like |Link to Comment
  • FactSet: Obvious GARP Play With A Superb Business Model [View article]
    Hey Brian, sorry for the long delay. I wrote in footnote 2 above:

    "...a quick glance at Nasdaq's (NASDAQ) count of insider sells verse insider buys, suggests employees are mostly buying and holding -- or cashing out at what seems like a reasonable scale considering the level of stock options given out."

    The company gives out an awful lot of stock options and it is likely some employees are under diversified. Also, I would argue they are mostly buying and holding rather than cashing out completely. E.g., take the case of Philip Hadley. He sold 80,800 shares in January but bought, with an option, 17,867 shares in late April. In total, he still has a position of 857,007 shares (worth about $90 million). It makes sense that he would sell some of his position. I don't think employee sales in this company would be indicative of future operational problems unless we see a flood of sales.
    May 6, 2014. 08:12 PM | Likes Like |Link to Comment
  • Otelco EPS of $0.45 [View news story]
    The EPS information above is incorrect. The correct amount for Q1 is an EPS of $0.45 a share (p. 2 of Exhibit 99.1 in the 8-K filed 5/6/2014).
    May 6, 2014. 07:56 PM | Likes Like |Link to Comment
  • FactSet: Obvious GARP Play With A Superb Business Model [View article]
    Why not? The only logical choice which is missing is TRI but TRI has some traits which make a ROA comparison awkward. (But still, I probably should have included TRI with the profit margin graph.) Its mostly an aesthetic preference, sorry if you disapprove. I like showing that FDS has better stats than my boy Google.

    By the way, even MORN isn't really that good a comparison on my part since MORN is more retail facing and mutual fund oriented than FDS. Very different products I believe.

    WTW is out of place for sure but it is there because I like (and own) the stock.
    Apr 25, 2014. 04:50 PM | Likes Like |Link to Comment
  • FactSet: Obvious GARP Play With A Superb Business Model [View article]
    Thanks for the comment Alpha Gen and I saw your Morningstar piece. I personally see the world more in Hewitt Heiserman's view point which he expressed below. The trend of asset prices is upward long-term (but that doesn't mean we won't have a correction in the near term). And at some point the public will reenter the market, increasing demand for financial services, etc.

    That said, I also believe the level of competition is increasing, especially from smaller players. The advantage FDS has is its preexisting databases. Those things are hard to build but very valuable once you have them. New competitors lack large proprietary databases (although, yes, they can license other's data but that data sometimes is not as good or the process is not as efficient; in any case, it is not ideal).

    Thanks for reading, keep us updated of your view point.
    Apr 25, 2014. 10:29 AM | Likes Like |Link to Comment
  • FactSet: Obvious GARP Play With A Superb Business Model [View article]
    Not a stupid question but I don't know the answer. Thanks for the observation. If you look here* you can see that the number of shares sold short has increased from 3.9 million to 6.2 million over the last year. Maybe people believe FDS's growth will fall short in the near term. A sell off wouldn't go very far though, I don't think.

    People also sometimes short stories which are "too good" with the belief that it cannot last or that there might be fraud involved. E.g., EBIX is "too good"; WRLD is "too good." This is pretty speculative but I've seen it.

    Obviously, I think shorting the stock is really dangerous, particularly given managements proclivity to do share buybacks.

    * http://bit.ly/1rt6DYs
    Apr 25, 2014. 10:20 AM | Likes Like |Link to Comment
  • Weight Watchers: Excellent Business At A Fire Sale Price [View article]
    Well from one IV to another IV, you are nearly correct. (I saw your article btw.) You wrote:

    "Just one observation I have with regard to your discussion of FCF in the context of debt obligation - true FCF (to the firm) for WTW in FY13 was actually $364m, NOT the $260m you cite. Your $260m number is net of interest expense of $103m, and therefore reflects PARTIAL debt servicing, and therefore this is understates free cash flow available for debt servicing."

    You need to take out the interest expense tax benefit that is represented in cash from operations. So, "free-cash-flow to the firm" would be $340 million for 2013 assuming a 39% tax.

    The $340 million number would be most useful when calculating interest coverage (in this case, it is over 3 times with 2013's interest expense; or 2.72 times using TTM free-cash-flow to the firm with the projected interest expense).

    Of course, if we were looking to see how many years it would take to pay off debt, we are obviously required to subtract the interest expense, just as we would if it were a lease expense.

    By the way, "free-cash-flow" is always in reference to equity since the cash payments which belong to debt holders are not "free." The word choice for free-cash-flow comes from the notion that it is what is "free" to be allocated where-ever (including distribution to the equity).

    Since debt interest payments are required, lest we enter bankruptcy, you can't add back interest and still call it "free" -- it just becomes "cash flow pre-interest charge." E.g., while it is true that a proper analysis of interest coverage requires adding back the interest expense net of the tax benefit (or $340 million for 2013) it is not true that that is all "free" cash. Only $240 million is "free." And, technically speaking, that cash will be routed to bond holders for a at least a couple years. Good thoughts, although I believe my figures are more somewhat more conservative.

    (Note to rigorous thinkers out there: the actual *cash* interest expense is quite different than the "interest expenses," notably due to the amortization of deferred financing costs. If you look at page F-26, you can see that the corporation only paid $88.8 million in cash interest in 2013 compared with an interest expense of $103.1 million. The difference is $7.6 million in "amortization of deferred financing costs" with the remaining $6.9 million somewhat unaccounted for but likely due to timing issues.)
    Apr 17, 2014. 12:30 PM | 1 Like Like |Link to Comment
  • Weight Watchers: Excellent Business At A Fire Sale Price [View article]
    Assuming they are setting themselves up for that, do you have any idea about what a reasonable future "going-private offer" would look like? I have a hard time seeing them attempting to acquire the company for under $1 billion, although I suppose that is possible. I suppose it depends on how bad 2014 is.
    Apr 3, 2014. 02:09 PM | Likes Like |Link to Comment
  • Weight Watchers: Excellent Business At A Fire Sale Price [View article]
    Extremely interesting.
    Apr 3, 2014. 11:35 AM | Likes Like |Link to Comment
  • Weight Watchers: Excellent Business At A Fire Sale Price [View article]
    I am not seeing what your seeing joey999. This is what the press release * has to say:

    "Michael fills a critical role on the Executive Committee," said Jim Chambers, President and CEO. "His analytical background, judgment and experience across a wide range of legal, operational and executive responsibilities will make him a trusted strategic advisor and partner for me and the rest of the Executive Committee as we continue to transform the company."
    Colosi brings to Weight Watchers more than 16 years of public company experience, including 13 as General Counsel for Kenneth Cole Productions. He is a highly engaging leader with a strong blend of law firm and in-house experience, as well as commercial, corporate and litigation expertise. As General Counsel and Secretary, Colosi will be responsible for leading the Weight Watchers legal team and advisors to provide counsel on issues of major importance to the company and to advise on significant strategic initiatives. Colosi will counsel senior management and the Board of Directors on matters related to securities compliance and corporate governance. He will also play a key role on the Executive Committee contributing to the company's strategy.

    Colosi comes to Weight Watchers after almost 14 years with Kenneth Cole Productions where he was Senior Vice President, General Counsel and Secretary. In that role, he served as chief legal officer for a multi-brand retail, wholesale and licensing company, both while it was listed on the New York Stock Exchange and throughout its transition to a private company. His responsibilities included corporate secretary to the Board of Directors, mergers and acquisitions, intellectual property protection and licensing, real estate, human resources, litigation, general corporate, and compliance.
    Prior to Kenneth Cole Productions, Colosi was Associate General Counsel and Assistant Secretary for NYSE-listed international apparel company Warnaco, Inc. In that role, he was elected as an officer by the Board of Directors, served as a member of the senior corporate management team, and worked closely with other officers, directors, and senior corporate and divisional staff as well as outside counsel, auditors and advisors globally.
    Previous experience includes nearly five years with law firms in New York and Washington, D.C. and prior to that a clerkship with the Honorable J. Edward Lumbard in the U.S. Court of Appeals for the Second Circuit in New York.

    Colosi received his J.D. from Michigan Law School where he graduated cum laude in 1991. He earned his B.A. in Economics and English from Cornell University where he graduated magna cum laude in 1987. He is a member of the New York State Bar and is admitted to the U.S. District Court for the Southern District of New York."

    * http://prn.to/1mBfe8M
    Apr 2, 2014. 10:51 PM | Likes Like |Link to Comment
  • Weight Watchers: Excellent Business At A Fire Sale Price [View article]
    Thanks for your comment. I disagree with your comparison to RSH -- RSH larger capital costs, much higher overhead, cycling operating leases and it is a merchandising business. Further more it is competing with BBY and VZ and T in their mobile phone retail space. Too different for a comparison, imo.

    Besides, a quick glance at the financial statements indicates these are two very different businesses. WTW obviously looks better in terms of cash flow. Also, if you count operating leases RSH has debt which is 5x market cap -- WTW's debt (counting operating leases) is probably around 2.5x market cap. Short story: RSH is in a far worse place.
    Apr 2, 2014. 03:44 PM | 1 Like Like |Link to Comment
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