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Ranjit Thomas, CFA  

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  • GeoEye: Insiders Prep for Mega-Growth [View article]
    All very good, except for the fact that the company has never generated any cash. All the cash that comes in has to go out to replace aging satellites, which have a life of about 10 years and cost $500Mn to build and launch. A buyout seems unlikely as a buyer will find it hard to put on any more debt on the company. Incidentally, the company just issued debt at a high 9% yield, which tells you something about what the debt markets think of its prospects. There are few barriers to entry in this business (other than capital which is plentiful), and a 3x price to book value seems grossly overvalued. Every few years, investors get excited about a satellite business that subsequently crashes and burns (Iridium, Sirius, etc.)
    Oct 18, 2010. 08:35 AM | Likes Like |Link to Comment
  • Just One Stock: A Trade-Oriented Educator Booking Organic Growth [View article]

    What you see as insider sales of 3 million shares in the last 6 months is the sale by Stonington Partners (a private equity firm) in a secondary offering in April. They have been gradually reducing their stake, which is now down to about 10%.
    Jul 13, 2010. 04:09 PM | 2 Likes Like |Link to Comment
  • High Conviction: This Hard Drive Maker Will Outshine the Competition [View article]
    Have you had a conversation with management on their capital allocation strategy? Why do they continue to stockpile cash without returning any of it to shareholders through a dividend or buyback?
    Jun 9, 2010. 09:03 AM | Likes Like |Link to Comment
  • High Conviction: An Underappreciated Software Stock [View article]
    The problem with NUAN is that it appears cheap only because the company pays its employees heavily with stock/options and conveniently pro-forma's out the expense. The GAAP earnings are considerably lower than the analyst estimates. The higher the stock goes, the more stock management sells, and the higher the number of outstanding shares. That said, it is in a good business and the shares do not look overvalued, but any market weakness would result in the shares taking a big hit as buyers disappear but sellers (management) don't.
    Apr 12, 2010. 08:52 PM | 5 Likes Like |Link to Comment
  • DynCorp: Undervalued Defense Stock with Substantial Upside [View article]
    I am recommending a closing of this trade today. DCP received an offer to be taken private by Cerberus for $17.55 per share, and the stock closed at $17.41 for a 55% gain in the 2.5 months since this piece was published vs. a 9% rise in the S&P 500.
    Apr 12, 2010. 08:45 PM | Likes Like |Link to Comment
  • Cavium Networks: Poised to Break Out? [View article]
    Good luck chasing a stock with the following characteristics:
    Zero earnings currently. 60x forward proforma EPS, excluding stock comp. Negative free cash flow. 9x revenues.

    That's CAVM for you. Fair value for the stock is somewhere in the single digits. There's always a nice story to spin around how great their future products will be, even if profits are always elusive.
    Dec 18, 2009. 04:37 PM | 1 Like Like |Link to Comment
  • Linn Energy: High Dividend, Low Valuation [View article]
    The problem with LINE is that like a lot of other exploration companies, they generate no cash, pumping huge amounts into capex. The high dividend yield is illusory because it is funded by regular equity issuances - no different from a Ponzi scheme. Also, they were smart/lucky enough to hedge most of this year's production at high prices. As these hedges come off, they will be in deep trouble.
    Aug 14, 2009. 07:05 AM | 7 Likes Like |Link to Comment
  • Lampert Sells More AutoZone Shares: What Happens Now? [View article]
    Don't see anything wrong in Lampert selling to lighten his substantial stake. AZO doesn't look overvalued at 13x EPS and FCF, and management should be lauded for actively returning cash to shareholders. Compare it to ORLY, for instance, that is trading at 20x EPS, where trailing FCF is negative (calling into question their earnings quality), and management is busy dumping their stock.
    Jul 19, 2009. 06:01 PM | Likes Like |Link to Comment
  • AutoZone: The End of a Bear Market Bulwark? [View article]
    Maybe your analysis can be improved by looking at AZO's PE and FCF multiple? I believe these are still pretty reasonable, especially compared to a competitor like ORLY.
    Jun 10, 2009. 08:39 AM | Likes Like |Link to Comment
  • Why Are Mutual Funds Accumulating Medassets? [View article]
    MDAS trades at 27x EPS, with 10% EPS growth, which looks solidly overvalued. I wouldn't be surprised if funds are looking at the revenue growth rate of 25% and buying it, but this growth is fueled by acquisitions. Looks like the analyst estimates for next year are too high. The stock is bound to come down as these estimates are revised downwards.
    May 13, 2009. 09:18 AM | Likes Like |Link to Comment
  • O'Reilly's Earnings Accelerate, but Stock Price Stalled [View article]
    Look at the cash flow statement. ORLY burned through $60Mn this quarter, and free cash flow is negative $160Mn in the last twelve months. These are the kinds of numbers one usually sees with companies that have borderline accounting fraud. So disregard the reported "profits" and follow the cash.
    Apr 30, 2009. 06:16 PM | Likes Like |Link to Comment
  • Beaten Down Natural Gas Likely to Stay Down, Making Producers a Short [View article]
    Agree with the article. RRC and HK seem to be the most overvalued at 40+x EPS and 5x revs. And this includes the benefit of significant hedges this year. As the hedges roll off, bankruptcy is a possibility.
    Apr 2, 2009. 10:15 AM | 3 Likes Like |Link to Comment
  • Why I'm Bullish on Whole Foods [View article]
    A company at 24x '09 EPS burning cash is a buy? Thank goodness for technical analysts! And don't forget the convertible they issued that dilutes the equity above $14.50.
    Mar 30, 2009. 08:22 AM | 4 Likes Like |Link to Comment
  • O'Reilly Automotive Benefits from the Slump [View article]
    ORLY hasn't generated any cash in the last 3 years, with free cash flow being more than negative $40Mn in 2008. It spends a huge amount on capex, and doesn't seem to flow it through into depreciation, thus inflating earnings. Aggressive accounting at best, borderline fraud at worst. Why would anyone want to buy a company at 18x low quality earnings, when half the market is trading at a single digit multiple?
    Mar 25, 2009. 09:11 AM | Likes Like |Link to Comment
  • What Happens When You Hold Leveraged ETFs for More than One Day? [View article]
    I think there is one big reason why leveraged ETFs tend to go down irrespective of the trend in the market they are meant to track. The ETF rebalances every day, with the extent of the rebalancing dependent on how much its sector goes up or down. So it incurs huge and constant trading costs, particularly when the market is volatile. I don't believe this reason has been highlighted by anyone as a cause for the performance drag in leveraged ETFs, and why they are not suitable for a buy and hold strategy.
    Mar 25, 2009. 08:24 AM | 6 Likes Like |Link to Comment