2 Buy, 2 Sell And 1 Hold Ideas By Jim Cramer

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Includes: BSBR, DG, MT, NUE, SDRL
by: Efsinvestment

Jim Cramer, the most joyful stock picker in the street, has been making his Lightning Round program since he returned from his vacation. Since then, he made his first Mad Mail program on Sep 8. He made five calls this time, three of them bullish and the other two bearish. I have investigated all of his Mad Mail stock mentions from a fundamental perspective, adding my O-Metrix Grading System where necessary. Here is a fundamental analysis of these stocks from Cramer's Mad Mail:

Stock Name

Ticker

Cramer's Suggestion

O-Metrix Score

My Take

SeaDrill

SDRL

Top Pick

9.39

Top Pick

Banco Santander

BSBR

Hold

10.31

Buy

Dollar General

DG

Avoid

5.59

Hold

Arcelor Mittal

MT

Avoid

3.55

Buy

Nucor Corp.

NUE

Buy

2.83

Hold

Cramer blessed SeaDrill after doing some research on it. As of the Sep 8 close, the company has a P/E ratio of 8.7, and a forward P/E ratio of 9.5. Estimated annual EPS growth for the next five years is 10.20%. With a profit margin of 40.4%, and a dividend yield of 6.90%, SeaDrill is a magnificent stock for dividend lovers.

Earnings increased by 94.60% this quarter, and it has an admirable O-Metrix score of 9.39. Target price is $38.56, which implies a 23.2% upside potential. The stock is currently trading 13.59% lower than its 52-week high, whereas it returned 24.2% in a year. The debt-to assets ratio is slowly going down for the last four quarters. Debt-to equity ratio (1.6), profit margin, ROE (34.4%), and operating margin (40.1%) are trustworthy green flags. Moreover, the company has a four-star rating from Morningstar. SeaDrill is worth adding to your ultimate retirement portfolio.

Cramer recommends holding onto Banco Santander as Brazil’s economy will take off in the next five years. The company shows a trailing P/E ratio of 7.7, and a forward P/E ratio of 8.0, as of Sep 8. Analysts expect the company to have an annual EPS growth of 15.5% in the next five years. It paid a thin dividend yield of 0.69% last year, while the profit margin was 27.9%.

Target price is $13.43, indicating an about 41.6% increase potential. The stock is currently trading 36.99% lower than its 52-week high, while it returned -25.2% in the last twelve months. Debts are far from being a threat. Earnings increased by 17.97% this quarter, and 15.34% this year. Debt-to equity ratio (0.1), profit margin and P/B (0.9) are strong green flags. O-Metrix score of Banco Santander is 10.31. Moreover, it has a five-star rating from Morningstar. Recent sell-off has created an advantageous entry point.

“Dollar stores trade sky-high right now,” Cramer commented, making a bearish call on Dollar General. The Tennessee-based discount retailer was trading at a P/E ratio of 18.5, and a forward P/E ratio of 13.3, as of Sep 8. Five-year annual EPS growth forecast is 17.8%. It has no dividend policy, while the profit margin is 4.8%.

Its O-Metrix score is 5.59, whereas target price implies a 13.1% upside movement potential. The stock returned 28.0% in a year, and it is trading only 5.74% lower than its 52-week high. Institutions hold 88.90% of the stock, and insider transactions have increased by 41.40% in the last six months. While SMA50 is 6.00%, SMA200 is 11.11%. The debt-to assets ratio is sharply going down for the last four years.

On the other hand, insiders own only 0.01% of the stock. P/E ratio, P/S (0.9), and debt-to assets ratio are solid red flags. Moreover, it has a one-star rating from Morningstar. Hold if you own it, but do not buy for now.

Cramer is bearish on steel stocks including Arcelor Mittal, as he thinks that they are not trustworthy in times of recession. However, he likes Nucor because of its high dividend. Here is a brief comparison between these two stocks:

Current as of Sep.8 close.

Arcelor Mittal

Nucor

P/E ratio

9.7

23.0

Forward P/E ratio

5.2

9.6

Estimated EPS growth for the next 5 years

2.0%

5.0%

Dividend yield

3.30%

4.23%

Profit margin

3.6%

2.6%

Gross margin

19.0%

8.0%

Upside movement potential

109.5%

36.3%

Arcelor Mittal is currently trading 49.31% lower than its 52-week high, while Nucor is trading 29.13% lower. Arcelor returned -39.5% in the last twelve months, whereas Nucor returned -13.9%. O-Metrix scores of Arcelor and Nucor are 3.55 and 2.83, respectively. P/E ratio, P/B (0.5), P/S (0.4), and debt-to equity ratio (0.4) are moderate green flags for Arcelor Mittal. On the other hand, P/E ratio, P/B (1.5), operating margin (4.6%), profit margin, and ROE (6.4%) are moderate red flags for Nucor. My indicators tell the opposite of Cramer. I believe Arcelor Mittal is a buy. It is OK holding Nucor, as well.

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