A Fundamental Look at Cramer's Lightning-Round Stock Picks

by: Efsinvestment

Jim Cramer's lightning round is one of the most popular shows on CNBC. Within 5 minutes, he mentions many stocks, making bullish and bearish calls. Here is a fundamental analysis of the stocks mentioned in Cramer's Lightning Round on June 28. I also provided these companies' O-Metrix scores to get a better understanding of their market beating potential.

Cheesecake Factory (NASDAQ:CAKE) returned 42% in a year, but Cramer still likes this stock. I also like Cheesecake Factory. It is one of the best places to go for dinner. However, as a stock, Cheesecake Factory is priced above its fair value. As of June 29, the stock was trading with a P/E ratio of 23.04 and a forward P/E ratio of 17. The company does not have a dividend policy. Analysts estimate an annualized EPS growth of 14.58% for the next 5 years. However, I think this is very optimistic since past 5-year EPS growth was only 4.27%. Cheesecake factory has an O-Metrix score of 3.65, which is below the market average.

Cramer suggests EZCorp (NASDAQ:EZPW) to play "the shrinking lower class and expanding upper class." Texas-based EZCorp is a credit service provider, financing short-term cash needs. Over the years, the company expanded its operations to Canada and Mexico, as well. As of June 29, the stock was trading with a P/E ratio of 16.43 and a forward P/E ratio of 11.78. Analysts estimate an annualized EPS growth of 15% for the next 5 years, which is very conservative given the 40% EPS growth in the past 5 years. Its O-Metrix score of 5.35 is better than the market average. I also think EZCorp is a good buy.

Imax Corporation (NYSE:IMAX) is the only movie chain Cramer wants to hold. He likes to buy it at the current price level. I also like IMAX. I think its international exposure would be a strong profit booster for the long-term. Analysts estimate an annualized EPS growth of 26% for the next 5 years, which is very conservative, given the past 5-year EPS growth of 63%. However, most of this growth expectation is already priced by the market. As of June 29, IMAX was trading with a P/E ratio of 28.69 and a forward P/E ratio of 20.52. IMAX does not have a dividend policy. Its O-Metrix score of 5.4 is still above the market average.

Zhongpin (NASDAQ:HOGS): Cramer thinks that Zhongpin is a very bad Chinese stock. Looking at the fundamentals, with a P/E ratio of 5.82 and a forward P/E of 4.37, the stock is a screaming buy. Maxim Group has a buy rating with a target price of $20. Global Hunter Securities also has an accumulate rating with a target price of $28. On paper, the company looks like a great deal. However, it is a Chinese stock. You will never know what to expect. Although the numbers look great, I would not risk a dime in a Chinese stock that keeps going down.

LDK Solar (NYSE:LDK): While the stock is trading at 50% lower than the 52 week high, Cramer does not like LDK Solar. Cramer does not want to hold it and he thinks of LDK Solar as a looser stock. Similar to Zhongpin, the company looks great on paper. P/E ratio is 2.44 and forward P/E ratio is 3. The balance sheet shows a book value of $9.8 per share, whereas the stock is trading at $7-$8 range. Numbers look too good to be true.

Cramer suggests Baidu (NASDAQ:BIDU) as a better alternative to the Chinese stocks listed above. He thinks that it has similar financials to that of the U.S counterparts. I do not agree with Cramer and I think Google (NASDAQ:GOOG) is a better deal. As of June 29, Baidu was trading with a P/E ratio of 74.8 and a forward P/E ratio of 34. Analysts estimate an extremely optimistic annualized EPS growth of 50% for the next 5 years. Even if their estimates hold, with an O-Metrix score of 4.5, these expectations are already priced by the market. On the other hand, Google is trading with a P/E ratio of 19 and a forward P/E ratio of 12.55. Analysts estimate an EPS growth of 19.29% for the next 5 years. Thus, with an O-Metrix score of 6.14, I expect Google to be a market beater for the long-term.

Cramer thinks that Alcoa's (NYSE:AA) second quarter earnings will be great and the company is undervalued. "This is a bad company, gone good" says Cramer. It is quite hard to make estimations about Alcoa's future, since its operations are well diversified. However, the aluminum-based products have significant industrial use. If you are a believer in strong economic recovery, Alcoa is a good investment. As of June 29, the stock was trading with a P/E ratio of 23 and a forward P/E ratio of 9.72. Dividend yield is 0.77%. Alcoa can be a market-beater, if the company can keep up its annualized EPS growth rate at a minimum of 10%.

Hawaiian Electric (NYSE:HE) is okay if you already own it, but Cramer prefers Southern Energy (NYSE:SO), Dominion Resources (NYSE:D) and Consolidated Edison (NYSE:ED). Utility stocks are boring, however, they provide nifty dividends with lower volatility. Many investors buy utility stocks to live on the dividends. Therefore, a double dividend O-Metrix model, where the weight of dividends is doubled, is a better way to rank these stocks:

DD O-Metrix = [(2*Dividend Yield + EPS Growth) / PE Ratio] * 5

The table below shows the DD O-Metrix scores of Hawaiian Electric, Southern Energy, Dominion Resources and Consolidated Edison:



5-Year EPS Growth

Average PE Ratio

DD O-Metrix






Hawaiian E.





Southern E.





Consolidated E.





The DD O-Metrix scores show that while all 4 utility companies are fairly priced, Dominion has the best score, followed by the Hawaiian Electric.

El Paso (EP): Cramer thinks that it is a winning stock and he likes the split up. It was a winning stock so far, yielding 44.73% since January. However, I doubt that it will be a winning stock for the future. The company offers a negligible yield of 0.2% and is trading with an extremely high P/E ratio of 34.9. While the forward P/E is expected at 14.96, given the 8% long-term EPS growth estimations, El Paso is destined to be a long-term loser. Instead of El Paso, one can invest in large-cap integrated oil stocks such as Chevron (NYSE:CVX) or ConocoPhillips (NYSE:COP), which are much cheaper than El Paso. Both Chevron and ConocoPhillips pay substantial dividends and are priced with single digit P/E ratios.

Disclosure: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.

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