Apple's Share Price In The Context Of Risk And Reward [View article]
Richbar,
2013 earnings are higher than $41/share given buybacks and an increase in net income. I assumed a large buyback of 17bn at $450/sh reducing share count from 938mm to 900mm. Thus, EPS is higher in my analysis.
Apple's Share Price In The Context Of Risk And Reward [View article]
Humble,
Yes, the ASP is per 10K12 not the MRQ. It certainly could impact revenue but minimally to share prices. Take my rough estimate of 137mm units, a $27 lower ASP, with 21% margins at 9x EPS. The difference is approximately a $8 lower target. A significantly lower ASP with poor unit sales would be a catalyst to much further downside. I imagine multiples would compress and compound that effect.
Apple's Share Price In The Context Of Risk And Reward [View article]
John, I mentioned $700 as the price target I had as of approximately 2 years ago using comprehensive forecasting methods. It reached above that point and I did not take my own advice. It's extremely unlikely shares would trade at 17x EPS to get to that point currently, which is why I am assuming 11x for the base case.
Chipotle Mexican Grill: The High Multiples Are Justified [View article]
Was the store operating level margin listed in their 10K? It may be but I've not come across it.
Here are my thoughts for what it's worth. First, no one can argue the strength of their brand. Any restaurant that can undertake such aggressive and capital intensive new store openings with only using cash flow is a great company. That aside, the near-term softness in the segment will likely drag on shares. You'll see I originally posted for a long position in CMG some months back. Further research showed the err of my ways. Bring the shares to mid to high 200's and I am long. Here are some thoughts to consider. First, why are they introducing catering now? Segment wide fast food, and really no need to separate out fast casual as it has the same drivers, has been in a decline since late 2012 and is this year. Just look at US same store sales across all major brands. There are concerns there. Management has even cautioned to not expect any blowout surprises. Additionally, prices will be increased soon, maybe the recent favorable commodity swings will push back increases, but they will happen. In each instance when CMG has raised prices, traffic count is reduced for approx 3-6 months, and sometimes not completely offset by higher avg checks. This will further pressure same store sales in 2013. Also, looking at catering, call their Colorado stores which have been the sole catering locations. None of the employees are familiar with the offering as its completely undifferentiated from their online ordering which has been around for years. This tells me catering may not offer a huge same store sales bump as the stores who offer it aren't fully aware of how to sell it. Believe me, I've called on a lot of the locations to ask this question. Another thought, CMG share multiples are solely driven by same store sales and operating margins. Take a look at CMG from IPO to date and review same store sales. You'll find that in similar situations where management guided for flat to low single digits, shares traded less than 30x EPS. That is the case now with slowing sales, yet shares are still above 30x EPS, and arguably, growth expectations are lower than in previous years. I'd have comfort in their high valuation if the growth outlook was higher than in previous years but it's not. It's an odd scenario to be short a high growth stock of such a good company but the downside potential in the next year far outweighs the upside.
Also, since its restaurants are all company owned, CMG earns all of the store level income, unlike a franchise operated company. In this instance I look at ROI very differently. It's the ROI for the whole company and all of its stores. Simply just net income (or cash flow or EBITDA if you prefer) divided by total store development costs. You'll get anywhere from a 10-40% ROI in this case. Remember too, their development costs don't include land. That ROI approach truly demonstrates what sort of return CMG is getting from all of its stores as it incorporates all costs.
And to lend some credibility to the longs, I don't agree with the whole Taco Bell as a competitor belief eating away at sales. Recall Taco Bell had to prove legally that their beef was indeed real cow. Consumers see the difference between the two firms and truly do deserve to be in separate competitive categories.
You may be right, I may be wrong in the near term, but I believe we both agree that 10 years from now, people will make some good money from the stock.
Analysts International: Everyone Loves A Turnaround Story [View article]
If I recall actually, they were pressed for more details on what strategic alternatives they have looked at without much of an answer...or dodging the question. Hazy but I seem to recall something similar.
Analysts International: Everyone Loves A Turnaround Story [View article]
Yeah...take a listen to that conference call. A few shareholders were pushing mgmt on the same question. I'd suggest a listen rather than reading the transcript as you pick up some intricacies of how management reacts to the strategic alternative questions. To me, they were caught off guard with demands for more ideas on strategic alternatives.
Analysts International: Everyone Loves A Turnaround Story [View article]
Yeah, let me know if you find something. To me honestly, I think there is more upside without an acquisition, assuming revenue stabilizes in the next years. I'd prefer investors and mgmt look beyond the next year to see that value, yet I understand those with losses desiring a buyout of some sort.
Analysts International: Everyone Loves A Turnaround Story [View article]
Just wondering, you mentioned "management is taking Heartland's advice to pursue alternatives"....what news do you have and as of what time frame? I've not been able to get much info beyond earnings calls, in which management has always been caught off guard by the requests of shareholders to find a buyer. Just wanting to see if you have any news.
Hopefully the shares continue the trend we've seen the last month. Should know better in a couple weeks after EPS results.
Analysts International: Everyone Loves A Turnaround Story [View article]
Andreas, My approach is to always look at growth in tangible book per share as it values the real, physical assets and negates value of goodwill and such which are worthless in liquidation. It's worth noting all of it is tangible for ANLY as they have impaired all goodwill and intangible assets in the last years. Essentially, I want to know a company is growing book value by more than just acquiring companies and recording goodwill, or in ANLY's case, recording trade names as an asset which turn out to serve no future value. Read about their acquisitions in the 2000's in the 10k if you haven't already...pretty insightful stuff in there about why to use tangible book.
For FCF, the short answer is no one can ever be completely confident in projections one year ahead, or years for that matter. We know this...3Q was likely a temporary reduction to FCF due to higher A/R balances which resulted from the ERP implementation. Mgmt has commented the implementation is complete so days of payables should come down to historical norms from 68 to 60'ish in future periods. That's a pretty significant bump to FCF from this past quarter. FCF all depends upon their growth rates as well. I write that they can currently support modest growth in the article without tapping revolving credit. If ANLY were to grow faster than I project, they need more working capital (reduction to FCF) and need to increase CAPEX(reduction to FCF). There is also the issue of forecasting depreciation which is difficult given the firm has slimmed down PP&E so much, thus giving little guidance about future depreciation levels. That is probably the area I feel least confident about it's accuracy. All in all, I don't use valuation as a sign that shares will reach that price..too many unknowns so I leverage in depth valuation as a means to show me how the company needs to perform to reach that target, and then I determine if it sounds feasible.
T. Rowe Price - Organic EPS Growth Compounder Poised For Appreciation [View article]
I agree with you Charles. My projections for AUM consist of about 8% market appreciation and the rest made up of fund flows at historical absolute levels.
I didn't highlight it much in this article but the downside risk is really what sells me on them, plus add in a special dividend that was announced today on top of managements intent to raise quarterly dividends in 2013.
Allocating Trade Capital To Apple's iPhone 5 Announcement [View article]
Yeah, who knows for tomorrow really. Should there be a downward move, I'd have to think it'd happen over a period of weeks after the announcement or just trade flat for a few weeks. Not enough to really make a bet on though. It's interesting with AAPL though after EPS, new highs, or announcements, it finds support 2-3 times and then rallies to a new high again. A simple outright long position seems best from here.
How To Trade American Express And Caterpillar Through October [View article]
Honestly, I haven't payed much attention to it for the purposes of this trade and it has little relevance. Notice I mention trade on this one. My horizon is only a few months and is just a play on an extreme diversion from the trend, non-fundamental based. That aside, yes, the slowdown does worry me for my longer term investments. I've worked various haircuts into my analysis to account for a slowdown in China and CAT wouldn't have much upside in this case. But I also have to look at the fact that it is a slowdown from a double digit pace which is still high growth. If CAT were selling at a high multiple, even more so worried. But again, steeply discounted P/E right now so there is a cushion on the downside.
Apple's Share Price In The Context Of Risk And Reward [View article]
Apple's Share Price In The Context Of Risk And Reward [View article]
2013 earnings are higher than $41/share given buybacks and an increase in net income. I assumed a large buyback of 17bn at $450/sh reducing share count from 938mm to 900mm. Thus, EPS is higher in my analysis.
Apple's Share Price In The Context Of Risk And Reward [View article]
Yes, the ASP is per 10K12 not the MRQ. It certainly could impact revenue but minimally to share prices. Take my rough estimate of 137mm units, a $27 lower ASP, with 21% margins at 9x EPS. The difference is approximately a $8 lower target. A significantly lower ASP with poor unit sales would be a catalyst to much further downside. I imagine multiples would compress and compound that effect.
Apple's Share Price In The Context Of Risk And Reward [View article]
Chipotle Mexican Grill: The High Multiples Are Justified [View article]
Here are my thoughts for what it's worth. First, no one can argue the strength of their brand. Any restaurant that can undertake such aggressive and capital intensive new store openings with only using cash flow is a great company. That aside, the near-term softness in the segment will likely drag on shares. You'll see I originally posted for a long position in CMG some months back. Further research showed the err of my ways. Bring the shares to mid to high 200's and I am long. Here are some thoughts to consider. First, why are they introducing catering now? Segment wide fast food, and really no need to separate out fast casual as it has the same drivers, has been in a decline since late 2012 and is this year. Just look at US same store sales across all major brands. There are concerns there. Management has even cautioned to not expect any blowout surprises. Additionally, prices will be increased soon, maybe the recent favorable commodity swings will push back increases, but they will happen. In each instance when CMG has raised prices, traffic count is reduced for approx 3-6 months, and sometimes not completely offset by higher avg checks. This will further pressure same store sales in 2013. Also, looking at catering, call their Colorado stores which have been the sole catering locations. None of the employees are familiar with the offering as its completely undifferentiated from their online ordering which has been around for years. This tells me catering may not offer a huge same store sales bump as the stores who offer it aren't fully aware of how to sell it. Believe me, I've called on a lot of the locations to ask this question. Another thought, CMG share multiples are solely driven by same store sales and operating margins. Take a look at CMG from IPO to date and review same store sales. You'll find that in similar situations where management guided for flat to low single digits, shares traded less than 30x EPS. That is the case now with slowing sales, yet shares are still above 30x EPS, and arguably, growth expectations are lower than in previous years. I'd have comfort in their high valuation if the growth outlook was higher than in previous years but it's not. It's an odd scenario to be short a high growth stock of such a good company but the downside potential in the next year far outweighs the upside.
Also, since its restaurants are all company owned, CMG earns all of the store level income, unlike a franchise operated company. In this instance I look at ROI very differently. It's the ROI for the whole company and all of its stores. Simply just net income (or cash flow or EBITDA if you prefer) divided by total store development costs. You'll get anywhere from a 10-40% ROI in this case. Remember too, their development costs don't include land. That ROI approach truly demonstrates what sort of return CMG is getting from all of its stores as it incorporates all costs.
And to lend some credibility to the longs, I don't agree with the whole Taco Bell as a competitor belief eating away at sales. Recall Taco Bell had to prove legally that their beef was indeed real cow. Consumers see the difference between the two firms and truly do deserve to be in separate competitive categories.
You may be right, I may be wrong in the near term, but I believe we both agree that 10 years from now, people will make some good money from the stock.
Analysts International: Everyone Loves A Turnaround Story [View article]
Analysts International: Everyone Loves A Turnaround Story [View article]
Analysts International: Everyone Loves A Turnaround Story [View article]
Analysts International: Everyone Loves A Turnaround Story [View article]
Hopefully the shares continue the trend we've seen the last month. Should know better in a couple weeks after EPS results.
Analysts International: Everyone Loves A Turnaround Story [View article]
For FCF, the short answer is no one can ever be completely confident in projections one year ahead, or years for that matter. We know this...3Q was likely a temporary reduction to FCF due to higher A/R balances which resulted from the ERP implementation. Mgmt has commented the implementation is complete so days of payables should come down to historical norms from 68 to 60'ish in future periods. That's a pretty significant bump to FCF from this past quarter. FCF all depends upon their growth rates as well. I write that they can currently support modest growth in the article without tapping revolving credit. If ANLY were to grow faster than I project, they need more working capital (reduction to FCF) and need to increase CAPEX(reduction to FCF). There is also the issue of forecasting depreciation which is difficult given the firm has slimmed down PP&E so much, thus giving little guidance about future depreciation levels. That is probably the area I feel least confident about it's accuracy. All in all, I don't use valuation as a sign that shares will reach that price..too many unknowns so I leverage in depth valuation as a means to show me how the company needs to perform to reach that target, and then I determine if it sounds feasible.
What about you? What's your outlook?
T. Rowe Price - Organic EPS Growth Compounder Poised For Appreciation [View article]
I didn't highlight it much in this article but the downside risk is really what sells me on them, plus add in a special dividend that was announced today on top of managements intent to raise quarterly dividends in 2013.
Allocating Trade Capital To Apple's iPhone 5 Announcement [View article]
Allocating Trade Capital To Apple's iPhone 5 Announcement [View article]
A Favorable Margin Of Safety For Caterpillar [View article]
How To Trade American Express And Caterpillar Through October [View article]