Dynamic Materials (NasdaqGS:BOOM) reported earnings a few hours ago and I believe the stock should be higher.
Somethings to consider:
·The average analyst earnings estimate was $0.44 EPS, the company delivered $0.54, a 19% beat.
· Revenue was expected to be $28.6mm, it came in at $35.7mm, a near 20% beat.
· Based on the old estimates the price target is $40, the stock is trading at $35 in the aftermarket.
· The industry average Debt/Total capital stands at 25% right now, BOOM is at 0.72%.
· The industry average operating margin is about 4%, BOOM is at 16%.
· The industry average ROE is 12%, BOOM has a ROE of 38%.
I think the analysts will revise their estimates upward given how conservative they are on the growth of the company.
The other side of the coin is that Dynamic Materials is approaching maximum production and so growth will revert to the mean. It seems management understands this and that is why they expect to have doubled production capacity in the Mt. Braddock facility by the end of the second quarter, expand their cladding operations in Europe and established a CAPEX budget of approximately $7.1 million in 2007.
I think BOOM is worth owing down here below $40 in light of this new information. In the short term I expect analyst revisions to be a catalyst to take this stock higher, as clearly earnings alone have not.
DISCLOSURE: I maybe long the stocks mentioned above for myself and clients. Not a recommendation to buy or sell any security. The information above has been obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The author and affilates shall have no obligation to update or amend any information contained above. For informational and educational purposes only.
Thursday, February 22, 2007
Tuesday, September 12, 2006
Potential Software Takeovers
I recently mentioned CKCM, and just two weeks later it caught a takeover bid which puts the stock at a 40% premium from where it was mentioned on 08/21. With large IT companies sitting on so much cash they could very well be looking to put it to work buying one of these companies. The key thing is a profitable company with good prospects, little debt and experienced management.
When it comes to software I can't stress enough the value of having experienced management. In the highly niche, sophisticated and competitive software market experienced management is the difference between a deal maker or breaker. Product lifecycles are very short in the software industry, so if your buying a software company, your buying into the people running it.
Here a list of software companies that fit the bill.
BOTTOMLINE TECH (NasdaqGM:EPAY) - Electronic banking is a growing market, and EPAY has demonstrated they can be profitable in this space. The CEO has been with the company since 1996 & the COO since 1998.
COVANSYS (NasdaqGS:CVNS) - Profitable software smallcap with a CEO who has stuck with it since 1985.
MOLDFLOW CORP (NasdaqGS:MFLO) - Makes computer aided engineering software. I think this company would better complement Illinois Tool Works core businesses then CKCM, but then again I thought someone like ORCL would have bought CKCM. CEO has been with the company since 1997.
PEGASYSTEMS (NasdaqGS:PEGA) - Probably the highest risk stock of the four, but also has the most committed CEO who has been with the company since 1983. With a marketcap of 286mm, but only an enterprise value of 159mm, it could easily be taken over by one of its many impressive partners.
When it comes to software I can't stress enough the value of having experienced management. In the highly niche, sophisticated and competitive software market experienced management is the difference between a deal maker or breaker. Product lifecycles are very short in the software industry, so if your buying a software company, your buying into the people running it.
Here a list of software companies that fit the bill.
BOTTOMLINE TECH (NasdaqGM:EPAY) - Electronic banking is a growing market, and EPAY has demonstrated they can be profitable in this space. The CEO has been with the company since 1996 & the COO since 1998.
COVANSYS (NasdaqGS:CVNS) - Profitable software smallcap with a CEO who has stuck with it since 1985.
MOLDFLOW CORP (NasdaqGS:MFLO) - Makes computer aided engineering software. I think this company would better complement Illinois Tool Works core businesses then CKCM, but then again I thought someone like ORCL would have bought CKCM. CEO has been with the company since 1997.
PEGASYSTEMS (NasdaqGS:PEGA) - Probably the highest risk stock of the four, but also has the most committed CEO who has been with the company since 1983. With a marketcap of 286mm, but only an enterprise value of 159mm, it could easily be taken over by one of its many impressive partners.
Tuesday, August 29, 2006
Perfect Storm Brewing
● 8 of 10 all time largest corporate buyouts occurred recently
● Private equity is sitting on nearly $1 trillion in cash (about 1/10 the value of the S&P)
● Stock buybacks are averaging $2.4 Billion daily while corporate selling (new offerings & insider selling) is around $900 million daily.
● The yield on the 10-yr treasury is 4.8%
● According to S&P the dividend + buyback yield = 5.6%
● The earnings yield on the S&P 500 = nearly 8% (2007 estimates)
● Earnings season is over and companies beat estimates by a ratio of 4:1
● Earnings estimates are rising
● Currently the fourth consecutive month of US equity fund outflows (last time was late 2002)
● The yield curve is inverted
Ok, so the yield curve is inverted, I know that has historically signaled a recession. But what does an inverted yield curve really mean? It means long term inflation is under control and short rates will be moving lower in the future. Most corporate debt is financed on the long end, so the fact that yields are falling is allowing companies to issue debt at lower yields and lower their cost of capital. The average investor is clearly bearish as witnessed by the fourth month of US equity fund outflow, but corporate America clearly isn't as witnessed by the record buybacks and M&A activity. The amount of cash just looking to be put to use is mind boggling, and when that happens it will be seeking the highest returns as capital always does, with stocks looking more attractive on a dividend/buyback & earnings yield basis. Lets not forget the analysts who follow these companies full time, they are currently revising their earnings estimates upward further showing that the fair value of many companies is above current levels. Ok, so you say with all this cash being put to use, when it finally happens their will be massive inflation. Lets not forget that businesses are growing and they need capital to finance this growth, perhaps why the yield curve is signaling low inflation ahead. So we have growth with little inflation, sounds like the making of a bull market.
● Private equity is sitting on nearly $1 trillion in cash (about 1/10 the value of the S&P)
● Stock buybacks are averaging $2.4 Billion daily while corporate selling (new offerings & insider selling) is around $900 million daily.
● The yield on the 10-yr treasury is 4.8%
● According to S&P the dividend + buyback yield = 5.6%
● The earnings yield on the S&P 500 = nearly 8% (2007 estimates)
● Earnings season is over and companies beat estimates by a ratio of 4:1
● Earnings estimates are rising
● Currently the fourth consecutive month of US equity fund outflows (last time was late 2002)
● The yield curve is inverted
Ok, so the yield curve is inverted, I know that has historically signaled a recession. But what does an inverted yield curve really mean? It means long term inflation is under control and short rates will be moving lower in the future. Most corporate debt is financed on the long end, so the fact that yields are falling is allowing companies to issue debt at lower yields and lower their cost of capital. The average investor is clearly bearish as witnessed by the fourth month of US equity fund outflow, but corporate America clearly isn't as witnessed by the record buybacks and M&A activity. The amount of cash just looking to be put to use is mind boggling, and when that happens it will be seeking the highest returns as capital always does, with stocks looking more attractive on a dividend/buyback & earnings yield basis. Lets not forget the analysts who follow these companies full time, they are currently revising their earnings estimates upward further showing that the fair value of many companies is above current levels. Ok, so you say with all this cash being put to use, when it finally happens their will be massive inflation. Lets not forget that businesses are growing and they need capital to finance this growth, perhaps why the yield curve is signaling low inflation ahead. So we have growth with little inflation, sounds like the making of a bull market.
Monday, August 21, 2006
Till death we part?
I was recently reading about Philip Fisher and his original investment in Motorola in 1955, which held until his death in 2004. This got me thinking about small companies today which have long term growth potential. This is a small list of unique companies which in my opinion have the potential to continue growing for years to come.
GARMIN LTD (NasdaqGS:GRMN) - The market leader in GPS is showing great growth potential with many cars still lacking GPS, there is plenty of room to grow.
CONSOLIDATED WATER (NasdaqGS:CWCO) - Develops and operates seawater conversion plants and water distribution systems in areas of the world where fresh water is rare or non-existent. Is there any doubt that there will continue to be demand for fresh water and in fresh water lacking areas no less?
CLICK COMMERCE (NasdaqGM:CKCM) - In short Click Commerce provides the software which allows e-commerce companies to work efficiently with their channel partners. Unless you see e-commerce going away, demand for supply-chain software should remain robust for years to come. Given the size of Click Commerce its not hard to see someone like Larry Ellison adding it to their collection.
DISCLOSURE: I maybe long the stocks mentioned above for myself and clients. Not a recommendation to buy or sell any security. The information above has been obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The author and affilates shall have no obligation to update or amend any information contained above. For informational and educational purposes only.
GARMIN LTD (NasdaqGS:GRMN) - The market leader in GPS is showing great growth potential with many cars still lacking GPS, there is plenty of room to grow.
CONSOLIDATED WATER (NasdaqGS:CWCO) - Develops and operates seawater conversion plants and water distribution systems in areas of the world where fresh water is rare or non-existent. Is there any doubt that there will continue to be demand for fresh water and in fresh water lacking areas no less?
CLICK COMMERCE (NasdaqGM:CKCM) - In short Click Commerce provides the software which allows e-commerce companies to work efficiently with their channel partners. Unless you see e-commerce going away, demand for supply-chain software should remain robust for years to come. Given the size of Click Commerce its not hard to see someone like Larry Ellison adding it to their collection.
DISCLOSURE: I maybe long the stocks mentioned above for myself and clients. Not a recommendation to buy or sell any security. The information above has been obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The author and affilates shall have no obligation to update or amend any information contained above. For informational and educational purposes only.
Tuesday, July 25, 2006
Medicine that Scales
Andy Kessler recently said in an interview "It is doctors that are the problem with medicine. Why? Because they are human (after all), and humans donÂ’t scale, they get more expensive. The trick is to embed their knowledge and expertise in silicon and software and algorithms and deliver it cheaper every year."
After reading that, I instantly thought of among my favorite momo's - INTUITIVE SURGICAL (NasdaqGS:ISRG) -
Valuation isdefinitelyy lofty, but the company continues to beat analyst estimates and at $1 million per machine, the company only has to sell 1000 Da Vinci's to do a billion in sales. With that kind of potential, I'm buying and holdinguntill the story is folding.
DISCLOSURE: I maybe long the stocks mentioned above for myself and clients. Not a recommendation to buy or sell any security. The information above has been obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The author and affiliatess shall have no obligation to update or amend any information contained above. For informational and educational purposes only.
After reading that, I instantly thought of among my favorite momo's - INTUITIVE SURGICAL (NasdaqGS:ISRG) -
Valuation isdefinitelyy lofty, but the company continues to beat analyst estimates and at $1 million per machine, the company only has to sell 1000 Da Vinci's to do a billion in sales. With that kind of potential, I'm buying and holdinguntill the story is folding.
DISCLOSURE: I maybe long the stocks mentioned above for myself and clients. Not a recommendation to buy or sell any security. The information above has been obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The author and affiliatess shall have no obligation to update or amend any information contained above. For informational and educational purposes only.
Monday, July 24, 2006
ATI should beat on Wednesday
TITANIUM METALS CORP (NYSE:TIE) reported better then expected earnings today. ALLEGHENY TECH NEW (NYSE:ATI)is a more consistent producer with more conservative estimates. Given the current demand for titanium based on TIE's reported quarter, I am willing to say with a high degree of probability that Allegheny will beat on Wednesday.
DISCLOSURE: I maybe long the stocks mentioned above for myself and clients. Not a recommendation to buy or sell any security. The information above has been obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The author and affilates shall have no obligation to update or amend any information contained above. For informational and educational purposes only.
DISCLOSURE: I maybe long the stocks mentioned above for myself and clients. Not a recommendation to buy or sell any security. The information above has been obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The author and affilates shall have no obligation to update or amend any information contained above. For informational and educational purposes only.
Monday, July 17, 2006
Playing the Heatwave
This is expected to be one of the hottest summers on record. People will be using their air conditioners which are known to consume alot of electricity. The clear winners in this case are the electrical utility companies. A few names I'm looking at are listed below.
AVISTA CORP (NYSE:AVA)
EMPIRE DISTRICT (NYSE:EDE)
F P L GROUP INC (NYSE:FPL)
MONTANTA DAKOTA UTIL (NYSE:MDU)
NISOURCE (NYSE:NI)
NRG ENERGY INC (NYSE:NRG)
PG&E CP (NYSE:PCG)
WESTAR ENERGY INC (NYSE:WR)
XCEL ENERGY INC (NYSE:XEL)
AVISTA CORP (NYSE:AVA)
EMPIRE DISTRICT (NYSE:EDE)
F P L GROUP INC (NYSE:FPL)
MONTANTA DAKOTA UTIL (NYSE:MDU)
NISOURCE (NYSE:NI)
NRG ENERGY INC (NYSE:NRG)
PG&E CP (NYSE:PCG)
WESTAR ENERGY INC (NYSE:WR)
XCEL ENERGY INC (NYSE:XEL)
Earnings Plays for the Week of 7/17
This week is options expirations week and the start of earnings season, which creates good oppertunties for option plays ahead of earnings. I am looking at buying July out of the money calls for the following stocks.
SOUTHERN COPPER (NYSE:PCU) - 7/18
PLX TECHNOLOGY INC (NasdaqGM:PLXT) - 7/18
JEFFERIES GROUP INC (NYSE:JEF) - 7/18
C S X (NYSE:CSX) - 7/18
UNITEDHEALTH GROUP (NYSE:UNH) - 7/19
DXP ENTERPRISE (NasdaqCM:DXPE) - 7/19 - no options traded
ASML (NasdaqGS:ASML) - 7/19
GEN DYNAMICS (NYSE:GD) - 7/19
ORBITAL SCIENCES (NYSE:ORB) - 7/19
RADIAN GROUP INC (NYSE:RDN) - 7/19 - in the money calls
DECKERS OUTDOOR (NasdaqGS:DECK) -7/20
POOL CORPORATION (NasdaqGS:POOL) - 7/20
CHARLOTTE RUSSE HL (NasdaqGS:CHIC) - 7/20
GENTEX (NasdaqGS:GNTX) - 7/20 - in the money calls
JOHNSON CONTROLS INC (NYSE:JCI) - 7/20
RELIANCE STL & ALMN (NYSE:RS) - 7/20
STEEL DYNAMICS (NasdaqGS:STLD) - 7/20
FREESCALE SEMICONDUCTOR (NYSE:FSL) - 7/20
SKYWORKS SOLUTIONS (NasdaqGS:SWKS) - 7/20
SPANSION INC. (NasdaqGS:SPSN) - 7/20
WESCO INTL INC (NYSE:WCC) - 7/20
NOKIA (NYSE:NOK) - 7/20
HOKU SCIENTIFIC INC (NasdaqGM:HOKU) - 7/20 - stock maybe better then options
MCMORAN EXPLOR CO SC (NYSE:MMR) - 7/20
BRITTON & KOONTZ C (NasdaqCM:BKBK) - 7/20
CONTINENTAL AIRLINES CL B (NYSE:CAL) - 7/20
INFINEON TECH (NYSE:IFX) - 7/21 - in the money calls
DISCLOSURE: I maybe long the stocks mentioned above for myself and clients. Not a recommendation to buy or sell any security. The information above has been obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The author and affilates shall have no obligation to update or amend any information contained above. For informational and educational purposes only.
SOUTHERN COPPER (NYSE:PCU) - 7/18
PLX TECHNOLOGY INC (NasdaqGM:PLXT) - 7/18
JEFFERIES GROUP INC (NYSE:JEF) - 7/18
C S X (NYSE:CSX) - 7/18
UNITEDHEALTH GROUP (NYSE:UNH) - 7/19
DXP ENTERPRISE (NasdaqCM:DXPE) - 7/19 - no options traded
ASML (NasdaqGS:ASML) - 7/19
GEN DYNAMICS (NYSE:GD) - 7/19
ORBITAL SCIENCES (NYSE:ORB) - 7/19
RADIAN GROUP INC (NYSE:RDN) - 7/19 - in the money calls
DECKERS OUTDOOR (NasdaqGS:DECK) -7/20
POOL CORPORATION (NasdaqGS:POOL) - 7/20
CHARLOTTE RUSSE HL (NasdaqGS:CHIC) - 7/20
GENTEX (NasdaqGS:GNTX) - 7/20 - in the money calls
JOHNSON CONTROLS INC (NYSE:JCI) - 7/20
RELIANCE STL & ALMN (NYSE:RS) - 7/20
STEEL DYNAMICS (NasdaqGS:STLD) - 7/20
FREESCALE SEMICONDUCTOR (NYSE:FSL) - 7/20
SKYWORKS SOLUTIONS (NasdaqGS:SWKS) - 7/20
SPANSION INC. (NasdaqGS:SPSN) - 7/20
WESCO INTL INC (NYSE:WCC) - 7/20
NOKIA (NYSE:NOK) - 7/20
HOKU SCIENTIFIC INC (NasdaqGM:HOKU) - 7/20 - stock maybe better then options
MCMORAN EXPLOR CO SC (NYSE:MMR) - 7/20
BRITTON & KOONTZ C (NasdaqCM:BKBK) - 7/20
CONTINENTAL AIRLINES CL B (NYSE:CAL) - 7/20
INFINEON TECH (NYSE:IFX) - 7/21 - in the money calls
DISCLOSURE: I maybe long the stocks mentioned above for myself and clients. Not a recommendation to buy or sell any security. The information above has been obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The author and affilates shall have no obligation to update or amend any information contained above. For informational and educational purposes only.
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