Office Depot Inc. (ODP)

All Comments on ODP

  • commenter
    Jeff - CoC
    Aug 08 09:24 AM
    My Website
    KSW, ePlus Look Like Bargains [view article]
    Paul,

    I was thinking about that yesteday as well, the risk/reward ratio. Indeed if the stock is worth maybe $3.15 in the worst case, the risk reward ratio is still over 3 based on what I really think it's worth. I'm not trying to know the company better than management, I believe it's a fallacy that you can really do so, I want to know everything I can from an outside perspective.

    Cash is cash until they starting burning it, which is another risk in an "earnings collapse" scenario. When looking at R/R, the entire downside case must be considered. So if I say to myself "ok, what else?" in the case of an earnings collapse that might be cash burn. See TRID, which I mentioned above, for this scenario.

    While these are not "probable" scenarios, they cannot be glossed over, not least of all for a small company without recurring revenues or a wide moat.

    Your analysis, for the most part, is right on though. The investment is no doubt a smart one at these prices.

    -Jeff     Reply
  • commenter
    palu77
    Aug 07 01:20 PM
    KSW, ePlus Look Like Bargains [view article]
    Jeff,

    Agreed you must consider all risks when developing a margin of safety and you are right to point out that they don't have a recurring revenue model. Still when developing an investment thesis it is important to consider risk vs. reward and using your assumption of a cash floor at $3.35 puts the risk at $1.65 per share. Where the reward with continue growth is ~$10/share, upside of $5. That is a sufficent risk to reward ratio for me as an investor.

    So with that said, I don't care to pour into the day to day activities and know them intimately or else I would apply to work at the company. I put some level of trust into a managment team that has performed admirably to date and combine that info with a healthy balance sheet and develop my buy decision. Now it is in Mgmt's hands and all I can do is hope that my anaylsis is on target and modify as new information is revealed.

    If I am wrong I sell when I realize I am wrong. If I am right I add to my postition when the time is right and wait to sell. I have owned KSW at $6/shr and my ananlysis still indicates that I am making a smart investment so I am adding to my position at this level.

    Good luck to you in your investment decision.

    Paul     Reply
  • commenter
    Jeff - CoC
    Aug 07 09:30 AM
    My Website
    KSW, ePlus Look Like Bargains [view article]
    Dave,

    I figured as much, that's why I mentioned my uncertainty. Thanks for the comment, I appreciate it.



    Paul,

    Good assessment, and I tend to agree. I am already very impressed based on the numbers and reading I've done so far. I just want to be sure.

    I'm not worried about a stoppage of growth, however. What I'm worried about is an earnings collapse. I understand that the next year and a half, maybe two are pretty much covered by the current backlog of projects. I'm also trying to understand what could possibly happen to that backlog. As I said above, if the earnings are stable, not even growing, the margin of safety is a monster. If the earnings are subject to a collapse (very small company, not a recurring revenue business model i.e. they must always be receving new projects)), the margin of saftey is current cash plus future cash on already backlogged items that will be completed in the next few years. If we assume they do generate 2.2mm in cash this year, that leaves them with $20.2mm, or ~$3.35/ share.

    My point is, downside risk is there in that if they lose new revenues, prices keep rising without the ability to pass them through, or there is a blip in their operations, there won't be much to add to existing cash for a full valuation.

    While I'm not saying this is likely, all risks must be considered to find a true margin of safety.

    Any other comments or thoughts I would appreciate.


    Reply
  • commenter
    palu77
    Aug 07 07:47 AM
    KSW, ePlus Look Like Bargains [view article]
    Jeff,

    Couple of comments of KSW. Your evaluation is right on as far as I can tell. However, I disagree with you about margin of safety. They have $18MM in cash and $140MM in backlog. If that isn't margin of safety I don't know what is. Not to meantion that the backlog is not with one project.

    1) I think is safe to say that the work resonably expected to be complete by the end of the year ($50MM) is safe. That will bring in an additional $2.2MM in earns this year or ($0.35/share).
    2) The company has a floor of ~$2.90 based on the $18MM is cash on hand. Furthermore a majority of the $2.2MM in potential earnings for the rest of the year should go directly into the current cash holdings.

    As for dividend, I wouldn't expect a quarterly dividend from KSW. They stated in their 10k that the companies dividend policy is set annually based on annual performance.

    Overall if you look at is from a risk versus reward stand point. Your max risk is $2.13/share if KSW trades at cash. But even if KSW stops growing it will not trade at cash so lets say it trades at 3x's EPS(ttm) plus cash or $4.3/share or $0.70/share downside.

    Your potential reward is $0.7*15 = $10.5 or $5.50/share upside, assuming a 15x's P/E on 2008 expected earnings.

    That translates into a 7.8:1 Reward to Risk ratio. Not bad.

    Good Luck

    Paul
    Reply
  • commenter
    DaveinHacken
    sack
    Aug 06 08:36 PM
    My Website
    KSW, ePlus Look Like Bargains [view article]
    Jeff,

    That wasn't a quarterly dividend, it was an annual one. There are no plans, as far as I know, for KSW to initiate a regular quarterly dividend.     Reply
  • commenter
    sunrises
    Aug 04 03:01 PM
    Ten Stocks Below $10 a Share [view article]
    Hello,

    ASX looks pretty interesting. Valuations pretty nice.     Reply
  • commenter
    bob s
    Aug 03 10:52 AM
    A 'Buy the Loser' Rally [view article]
    i would like to try this software, can i get a copy?


    On Jul 21 03:58 PM Toeser wrote:

    > This is a well understood trading technique. I have software for
    > back-testing and buying the biggest decliners at an interim or final
    > bottom works a huge percentage of the time for a quick buck.     Reply
  • commenter
    billddrummer
    Jul 31 08:02 PM
    Can One Profit From Poor Customer Service? [view article]
    Good article, and I agree that local store management is the first line of defense against poor customer service. I work for a "Worst Buy" store that opened about 18 months ago, and people have been fired for delivering poor customer service. Imagine that!

    We try to make our store look like it did the day it opened. So you see people cleaning, straightening shelf displays, and generally taking care of things throughout the store--even outside their normal departments.

    But when customers are in the building, that's where we shine. Some customers claim that we're too attentive--they'd rather be left alone to shop. But we'd rather err on the side of overkill than ignore a customer.

    There's a metric in retail called 'lifetime value.' In other words, what will that customer spend in their lifetime in your store? If you give a poor experience, the customer will take their dollars elsewhere. And give that lifetime value to someone else.

    We at Worst Buy take that seriously. And with nearly 1000 stores in the US now, it's getting more and more challenging to keep everyone focused on the customer. But after all, that's the only thing worth focusing on--meeting customer needs quickly, efficiently, and completely.     Reply
  • commenter
    missplaced
    alaskin
    Jul 31 02:24 PM
    Can One Profit From Poor Customer Service? [view article]
    In all fairness to your poor customer service.
    If the cashier can not count change, it is not the store it is the local school.
    If the sails person is rude, that person is in most cases a neighbor with in ten miles of the store.
    If the sails person is not trained in the product. That was the first thing years ago that all stores did to cut costs was cut the knowledge the people that have the know-how want paid to use it. Most workers now are paid at or around fast food $ and that is what you get. If you want better then pay better.

    I (worked) for Lowe’s in the 80s and 90s. I got a job there because I knew more about what I wanted than the sails person. (I worked in construction in the military for twenty years).
    When I started it and most stores was all about customer service but most customers when were civil. Most people that came in that some idea of that whey wanted or needed to get, but in the late 90s the customers (the things that come through the door) changed.
    If you asked one if you could help?
    Most would not act as if you were there. Or continue talking on there phone for ten minuets or if you started to the next person they would NOT put down the phone BUT course you out in a loud voice
    If you ask them what they want/ needed most had no idea but if you tried to asked any question to steer them to the right section of the store for what they needed all hell would go off.
    In all most ten years of working there I was hit, punched, spit on, and threaten.
    Some people seem to come into a store ready for a fight and if given a chance they will start one, just to show off to the people (MOB) with them.
    As most home owners know what they want a project to look like when finished, but not how to get there. This is where the problem starts
    If you ask some questions, you are talking down to them.
    If you try to steer them to the things they need to do the project, then you are trying to sail them stuff they do not need.
    If you do not ask the questions and let them get what they think they need and take it home and try to make something most will break it the return it saying that it is what the sails person told them to get.

    At the end just remember the most people in may store makes in a year what you make in a mouth

    Reply
  • commenter
    User 81960
    Jul 30 04:41 PM
    Replacement Candidates for David Merkel's Portfolio: From AA to ZZ [view article]
    YOU HAVE TO MANY STOCKS TO FOLLOW.
    ALL YOU NEED IS SOMETHING LIKE THESE.
    CHK / CSCO / EMC / FCX / GE / HAL / IPI / MON / MRVL / MSFT / RIMM / T / TEVA / V / WB / YUM.
    JUST 16 STOCKS TO FOLLOW.
    THEN YOU CAN DO YOUR HOMEWORK ON EACH .     Reply
  • commenter
    Joshua F
    Collins
    Jul 29 05:26 PM
    Can One Profit From Poor Customer Service? [view article]
    I found this company and they even train the government on these services.. check out their press release send2press.com/newswir...



    This company educates large companies and government on telecom and telephone billing errors and fraud. Their website is really informative too. Check it out at auditelinc.com.


    Joshua
    Reply
  • commenter
    Whiners
    Jul 28 09:18 PM
    General Discussion on ODP
    Maybe you people should stop whining and thinking you walk on water? Serious are you guys kidding me you all want great service but want to pay the least amount possible so you feel good about yourselves. Try paying attention to your children so when thet grow up they will be naturally respectable. Treat others as you wish to be treated. Shop at a MOM and POP store and see the difference. It costs a dollar or two more and you will be happy. Oh but then what would you whine about. Reply
  • commenter
    te
    Jul 28 06:13 PM
    My Website
    Can One Profit From Poor Customer Service? [view article]
    I was fortunate enough to work for a company that was high on Customer Service, and I carry that philosophy with me still. I agree that it's really lacking, and getting worse.

    Recently I've taken a few trips to Japan and I was blown away at the level of service I received EVERYWHERE...and it's provided because it's their culture (one which we used to have but have fast lost) and people take pride in doing the best job possible. On top of that, it's a 'no tip' society.

    But also I think Consumers share some responsibility because they "reward" shops with the lowest price. Shoppers will tell you before their purchase that they don't care about service, they just want the best price. It's not until after something goes wrong that they expect the service that you would expect, had you not purchased from a deep discounter or a shady, fly by night store. But those stores that sincerely want to provide service find themselves having to cut back to compete with the low price stores that do not provide service - and guess what? They have to cutback somewhere, and eventually service is one of those places (can no longer afford to have a longer return/exchange, can no longer pay for quality employees, etc).

    If people stop supporting stores that provide lousy service, they will either have to start providing better service or go out of business. But that's the catch...most people aren't willing to pay for service anymore, and they show it by supporting the shops with the lowest price, regardless of service (then complain later).

    The way it's headed now, we might reach that point, because I agree that service in America has become almost unbearable at many places, and seems to be getting worse. Hopefully people will get tired enough to stop supporting those shops and business will once again demand excellence from their employees, and back up their services/products as they should.     Reply
  • commenter
    InStl
    Jul 28 04:31 PM
    Can One Profit From Poor Customer Service? [view article]
    As a former "Great Buy" store manager for over 17 years (I left over 3 years ago), I can tell you that the level of service you get from any chain retailer is dependent upon the store management staff. Upper mgmt. is constantly preaching outstanding customer service with most retailers but the bottom line result is at the store level.
    "Rudeman" uses an example of a lawsuit asking for a ridiculous amount of money for a lost laptop to question the quality of customer service of an entire company based on customer service at one store out of 700 US locations. The level of service and communication was lacking at this particular location but to condemn all because of one is not a practical logic. I hope his moniker is not his normal customer attitude. I will also tell you that yelling, screaming, namecalling, or being rude is not the way to get a problem resolved. I always tried to be courteus to every customer but when the person became personal or abusive, it was time to shut the converstion down until they could become reasonable again.
    As far as WalMart and Target excelling with little to no level of customer service, that is the basis of their business and I love shopping at Target. I also know that I am not going to get educated about their products when I am shopping for a higher dollar item. With my experience, that is what most customers who are investing hundreds and thousands of dollars are looking for, someone who can teach them and make them feel comfortable with their product. If you are an individual who can educate yourself adn feel confident with your product choice, by all means shop the discounters. It is all dependent upon the level of service you require.     Reply
  • commenter
    aussusan
    Jul 28 11:43 AM
    Can One Profit From Poor Customer Service? [view article]
    I went against my usual practice of saying NO to the sales pitches and purchased a "Performance Protection Plan" from Office Depot for a printer/copier/fax machine. After two weeks and multiple phone calls trying to get a technician to come to the office to take a look, I was actually told by a supervisor (after 30 minutes on hold waiting to speak to her) "if you would have talked to a supervisor sooner you could have gotten this taken care of". My response - "you mean I have to talk to a supervisor before you will honor my protection plan ?!?!" But I know any threats of not shopping at their stores etc. will fall on deaf ears...they just don't get the big picture of losing one customer at a time adding up to lost profits. So here I sit at their mercy, $140.00 poorer but wiser. Reply
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