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hedger78

hedger78
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  • Determining Micron Technology's Fair Value [View article]
    You mentioned EPS to grow by 16%. Are your assuming FCF will also grow by 16%? Did you account for increasing working capital in your DCF model? Can you post your DCF model here? What about capex?

    I am not trying to poke holes in your analysis or being a smart alec. I simply presented how I came up with $30 number and I could be very very wrong in my analysis, only time will tell.
    Sep 11 05:58 PM | 2 Likes Like |Link to Comment
  • Determining Micron Technology's Fair Value [View article]
    Jaret,

    I see your point and I totally agree with you. All I am saying is that $30 is the fair value based on historical CF multiple. Like I said this just a quick back of the envelope analysis I did. Now, if the company has gotten better and the business has flourished and is expected to keep growing, MU should most definitely be trading at a higher multiple. Let's assume 7x of next year's cash flow, that puts the value at $42 approx. Now that is still more realistic than $57 that the article came up with.
    Sep 11 04:20 PM | Likes Like |Link to Comment
  • Don't Try To Time The Bottom At DSW [View article]
    Buy DSW as it hits 20 EMA. The stock has 10% upside. Trading at 19x forward P/E does not make a stock overvalued or undervalued.
    Sep 11 03:57 PM | Likes Like |Link to Comment
  • Determining Micron Technology's Fair Value [View article]
    I don't do a full blown DCF to figure out the fair value of a company. I leave that to the high profile investment banking analysts. The only thing I look at is what the shareholders have paid in the past for $1.0 of cash flow generated by the company. Unless there is a compelling reason that the company's prospects are improving drastically and the investors should pay more than what they paid in the past (multiple expansion), I use the historical multiples. Does not matter if the multiple is half of what the industry or SP 500 is trading at.

    MU historically traded at around 5x cash flows. 2015 estimated cash flow numbers sits around $6/share. That puts the fair value around $30/share by mid 2015. Since the stock is already trading at that level, I would rather pass and find something that has better risk/reward characteristics.

    Now, keep in mind, all this changes in one situation. If the company reports better than expected earnings, raises guidance, 2015 EPS estimates will go up and so will the fair value.
    Sep 11 03:51 PM | 5 Likes Like |Link to Comment
  • Determining Micron Technology's Fair Value [View article]
    Nice article. Micron is deeply undervalued in your opinion. So are you going to buy this stock? I mean it has an upside of more than 50%, right? DCF assumes that all the cash will be disbursed to the shareholders, which is usually not the case. Secondly, going from 10% WACC to 11% to 9% will change the FV estimate quite a bit.

    Micron should be trading right around $30, and it is.
    Sep 11 02:42 PM | Likes Like |Link to Comment
  • Norfolk Southern: This Railroad Stock Can Deliver More Upside [View article]
    Anup,

    What makes you think NSC should be trading at/close to industry average PE? In the last 8 years NSC never traded at an average (yearly) PE ratio of 25. So why now? What would cause the multiples to expand? NSC is no doubt a well run company that has rewarded its shareholders well but that does not mean it is undervalued. In my view NSC is 20% overvalued at current levels. The stock should be trading at 13x-14x forward EPS and it currently is. The stock is trading at all time highs. The right time to buy the stock was in October 2013 when it broke out.
    Sep 7 01:58 PM | Likes Like |Link to Comment
  • The Indian Rupee: New Risks Evolve As Oil Cools And Gold Imports Decline [View article]
    Last month, the U.S. added 209,000 jobs taking the unemployment rate to 6.2%. What about the participation rate? 6.2% UE is just a mirage, actual unemployment is more than that.
    Sep 2 11:11 PM | Likes Like |Link to Comment
  • Why Tata Motors Should Re-Think About The Nano [View article]
    Agree with bsa9. JLR is indeed a cash cow for TTM. Would be nice if you could add financials/valuation multiples to your analysis. You presented useful information but nothing there to decide when and why to pull the trigger.
    Sep 2 11:06 PM | Likes Like |Link to Comment
  • Where Are Gold Prices Heading? [View article]
    So, is Gold a buy/hold/sell?
    Sep 2 11:02 PM | Likes Like |Link to Comment
  • With 68% Upside, Hanesbrands Is A Hidden Gem In The Apparel Industry [View article]
    Not everything in the industry is supposed to be trading at industry average PE. When is the last time HBI traded at 28PE? Why would the multiple expand now? fair value of $172 is a pie in the sky. In my view, HBI is fairly valued at current levels. The company is trading at 14x of 2014 cash flows. I would not pay more than 13x for HBI. HBI is a good company with super ROE and ROC but is fairly priced at current levels.
    Sep 1 12:11 PM | 1 Like Like |Link to Comment
  • The Only Beer Stock That Could Realistically Triple Over The Medium Term [View article]
    What about lofty valuation? Trading for 16x 2015 cash flow, 30x forward PE. ROE is less than 6%.
    Aug 6 12:21 AM | 1 Like Like |Link to Comment
  • Why Alcoa Stock Will Continue To Soar To $20 [View article]
    Understand your tone of optimism on Alcoa but didn't see any rationale behind the $20 target price. What are you basing your decision on? Is it PE expansion? AA is already trading at forward PE of 19x. EV/EBITDA (ttm) is close to 10 as well.
    Aug 4 02:48 PM | Likes Like |Link to Comment
  • Union Pacific Just Keeps Chugging Along [View article]
    "has a market cap of $1.79 billion and its stock price is around $172". The Market cap is over $70 billion. I am sure it was a typo so wanted to let you know. No pun intended.

    I like the company. Great ROE and Operating margins. In my view, the company is fairly valued though. I would look for around $130-$140 for a decent entry point. Just one more quick comment - 19.2x PE is not SLIGHTLY higher than 15x by any means. It is more than 20% higher. Historically, the company traded at 15x average annual PE. I would not pay 19X for a dollar in earnings. Furthermore , you should never look at TTM PE, the market is forward looking and forward PE is around 17x.
    Feb 3 09:17 PM | 1 Like Like |Link to Comment
  • Baker Hughes Will Outperform Its Competition [View article]
    BHI is definitely showing some relative strength lately but there is no reason it should should perform any better than the peers. You probably missed the fact that ROE and ROC for BHI is much lower than HAL and SLB. Although, BHI generates more FCF per share than HAL and SLB, the lower ROC will make you less money in comparison going forward. I would rather wait to see if HAL presents a decent entry point.
    Jan 26 10:18 PM | 1 Like Like |Link to Comment
  • Undervalued Stock Of The Week: PetSmart [View article]
    I wonder how the calculator is coming up with a fair value of $98 using DCF. With no inputs such as EBITDA/Tax Rate/Depreciation/Capex and change in working capital, I won't rely too much on this DCF number.

    The stock is currently trading for less than 15x forward PE. Given the company has great ROE/ROC and operating margins, I think the PETM should be trading at atleast 17 PE. Based on these assumptions I value PETM at $76-$80.
    Jan 26 11:19 AM | 1 Like Like |Link to Comment
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