Fundamental Analysis of Cramer's Lightning Round Picks: July 12

by: Efsinvestment

In Cramer’s Lightning Round on July,12, his mentions were mostly on bullish ones. Even with these few stocks, one can compose a profitable portfolio. Here is a funtamental analysis of the stocks mentioned in Cramer’s Lightning Round on July 12 (data from finviz/morningstar, and current as of July 13’s close):

Atlas Energy (AHD): Atlas is the only utility company Cramer wants to hold. Altough the company is suffering bad for now, it promises a much better future. As of July 13, the company had a 7.60 forward P/E ratio. Target price is $34.00, which implies an about 50% upside potential. ATLS is trading 16.03% lower than the 52-week high. Atlas pays a 1.92% dividend. Analysts expect the company to have a 49.5% EPS growth in the next five years, which sounds overdone given the -16.98% EPS growth of past 5 years. Debts are on a free fall for the last four quarters. I believe the company will stabilize itself in the near term.

Magna International (NYSE:MGA): MGA returned 48% in a year, and Cramer is bullish about Magna International, along with Johnson Controls (NYSE:JCI). As of July 13’s close, Magna was trading at an admirable trailing ratio of 11.31, and a forward P/E of 9.16. Earnings increased by 312.48% this year, and 31.81% this quarter. Analysts estimate an 11.33% EPS growth for the company, which is quite reasonable given the 8.82% EPS growth of past 5 years. Target price is $64.37, implying an about 22% upside movement potential. The company is trading 14.50% lower than 52-week high. Profit margin is thin, but the Aurora-based company pays a 1.96% dividend yield. Debt-to assets ratio is almost zero percent. Magna is a profitable company to invest in.

Southwestern Energy (NYSE:SWN): SWN is a truly profitable stock that has a promising future. $1000 invested in Southwestern in Jul,2006 is approximately $3020 now. The company shows a trailing ratio of 26.55 and a forward P/E of 18.50, as of July 13 close. The company had a whopping EPS growth of 1765.99% this year. Analysts expect the company to have a 21.50% EPS growth for the next five years. Although SWN pays no dividend, the company has an admirable profit margin of 21.71%. Debts are increasing, but assets easily outrun them. Insiders have been both selling and exercising options for a while. That is a strong warning from the insiders. Maybe it is time to take profits, as Cramer suggests.

Crocs, Inc. (NASDAQ:CROX): Although Cramer missed the move, he suggests taking profits. As of July 13’s close, the consumer goods company was trading at a P/E ratio of 27.93, and a forward P/E ratio of 18.88. Earnings increased by 254.40% this year, and 267.03% this quarter. $1000 invested in this company one year ago is about $2575 now. ROA is 15.75%, while the profit margin in 2010 was 9.83%. The company has almost no debts and pays no dividend. CROX can still be profitable, and can enter portfolios as a long-term investment for the futrue.

Chimera Investment (NYSE:CIM): Although the company is trading 16.59% lower than the 52-week high, Cramer is bearish on this stock. CIM looks brilliant on the sheet, but when it comes to field performance, I can say that it is a must-sell. It pays a 15.20% dividend yield and has a brilliant P/E of 5.43 with a forward P/E of 5.80. On the other hand, $1000 invested in Chimera in Nov,2007 is about $226 now. Dividend yields are unstable. Debts increased by almost 1500% in the last four years, while assets increased by only about 550%. Earnings decreased by 15.11% this quarter. I would stay away from this company.

Cramer recommends Annaly Capital (NYSE:NLY) instead. Annaly recently announced a new share offering which has yet to show the dilution effect on the stock price. The investment trust was already priced with 20% premium over its book value. However, Annaly’s P/B ratio is still below the industry average of 1.4. The company’s ROE of 15.1% is also higher than the industry average of 12.3%. Out of 17 analysts covering the company 1 has outperform, 11 has buy, 7 has hold ratings. With a trailing P/E ratio of 7.3, forward P/E of 7.7, and a projected dividend yield of 14.4%, Annaly looks like a good deal.

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