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I am always on the 'look-out' for new stock market investment ideas! These are the stocks that make up my blog, the stocks that I call my "vocabulary" of investing. It is from these stocks that I have built my portfolio. These are the companies that fit my profile of investable companies. Teledyne Technologies (TDY) appears to fit the bill for me!
When I first start looking for a new name to write up here on the blog, I simply go over to the list of top % gainers and see if any of the stocks making nice moves higher, either on the AMEX, the NASDAQ, or the NYSE deserves a spot on the blog. I do not check every stock. I do not even look every day. But when I get a chance, if I find anything I try to write it up, and this serves me well in learning about the company as well as offers my readers a chance to perhaps learn about a stock that they haven't considered before.
Teledyne (TDY) made the list today, and as I write, is trading at $46.33, up $5.14 or 12.48% on the day. I do not own any shares nor do I have any options on this stock. Let me go over the things that I saw that made me think it was a good "pick".
TELEDYNE (TDY) IS RATED A BUY
What exactly does this company do?
If we look at the Yahoo "Profile" on Teledyne, we can see that the company
"...provides electronic components, instruments, and communications products in United States, Europe, Japan, and Canada. It operates in four segments: Electronics and Communications, Systems Engineering Solutions, Aerospace Engines and Components, and Energy Systems."
How did they do in the latest quarter?
Shortly before the open today, Teledyne announced what I consider a very strong 1st quarter 2007 earnings report. As they noted, revenues climbed 16.8% to $385.6 million compared to sales of $330.2 million last year. Net income worked out to $20.5 million or $.57/diluted share, up from $17.9 million or $.51/diluted share in the same period last year.
One of the important part of any earnings announcement is the expectations on earnings. In this case, Teledyne beat expectations, which, according to Thomson Financial, analysts were expecting revenue of $383.3 million, and earnings of $.50/share.
As also reported, the company raised guidance:
"For the full year, Teledyne now expects earnings of $2.50 to $2.54 a share, excluding options expense and other items. It had in January forecast earnings of $2.41 to $2.44 a share for the year on the same basis.
Analysts were expecting earnings of $2.39 a share for the full year, excluding exceptional items, according to Reuters Estimates." In my 'lingo', I call this a "trifecta-plus", which is like getting 'straight A's in middle school'! That is, a near perfect report card from the company which reported increasing revenue, increasing earnings, beat expectations, and raised guidance! Everything an investor hoping for appreciation in a stock price could wish for!
How about longer-term results?
In my idiosyncratic stock-picking technique, I am not looking for a 'one quarter wonder'. I am looking for a company with the kind of management and business able to consistently produce good or great financial results. For this information I have been turning to Morningstar.com, in particular the "5-Yr Restaqted" financials page.
Reviewing the "5-Yr Restated" financials on TDY from Morningstar, we can see that revenue has grown steadily with $773 million in 2002 increasing to $1.43 billion in 2006. Earnings have also increased steadily from $.77/share in 2002 to $2.26/share in 2006. Meanwhile, the company has maintained a very steady hand on the outstanding shares with 32 million in 2002 and $35 million reported in 2006. While this is an increase of a bit under 10%, revenue has nearly doubled and earnings have nearly tripled. This is a very acceptable dilution of the shareholders' equity interest.
Free cash flow has been positive recently but not particularly increasing with $66 million in 2004, $73 million in 2005 and $52 million reported in 2006.
The balance sheet appears solid with $13 million in cash and $433.8 million in other current assets. This total of $446.8 million, when compared to the current liabilities of $230.4 million yields a current ratio of 1.94. Generally, current ratios of 1.25 or higher are considered 'healthy'. The company also has $399.2 million in long-term liabilities per Morningstar.
How about some valuation numbers on this stock?
Looking at Yahoo "Key Statistics" on TDY, we can see that this is a mid cap stock with a market capitalization of $1.61 billion. The trailing p/e is a very moderate 20.46 with a forward p/e (fye 31-Dec-08) estimated at 17.27. Thus, with the rapid growth in earnings expected, the PEG (5 yr expected0 works out to a nice 1.16. (As I have written elsewhere, I like to see PEG's between 1.0 and 1.5 for a 'reasonable' valuation.)
Checking the Fidelity.com eresearch website on valuation also reveals good valuation information that the Price/Sales (TTM) for TDY comes in at .99, below the industry average of 1.40. From a 'profitability' perspective, TDY comes in just below the industry average of 20.66 return on equity with a 20.28% ROE figure (TTM).
Finishing up with Yahoo, we can see that the company has 34.85 million shares outstanding with 31.46 million that float. As of 3/12/07, there were 1.97 million shares out short, representing 6.1 trading days of volume (the short ratio) or 5.9% of the float. My own figure of 3 days for a cut-off of significance, suggests that we may well be seeing a bit of a short-squeeze on the short-sellers today, as the company reported strong results ahead of expectations, buyers came into the market, and the short sellers added to the stampede as they sought to close out their 'pre-sold' short positions, by adding shares to actually cut their losses. I do not have any information on this beyond this statistic, but it does make a person wonder!
What about the chart?
If we examine a "Point & Figure" chart on Teledyne from StockCharts.com, we can see a very strong price chart with a stock moving strongly higher from a low in the $11 range in March, 2003, to its current level of $46. The chart looks strong to me!
Summary: What do I think?
Basically, I like this stock a lot! The company reported great numbers today in the face of a significant short interest, exceeding expectations and going ahead and raising guidance. They have been performing well for several years, have a reasonable valuation, a strong chart, and a solid financial underpinning. If I were in the market to buy shares today, this is the kind of stock I would be buying, it deserves a spot on my blog and a place in my 'vocabulary' of stocks!
Thanks so much for stopping by! If you have any comments or questions, please feel free to leave them on the blog or email me at firstname.lastname@example.org. If you get a chance, be sure and visit my Stock Picks Podcast Website, where when I get a chance, I like to discuss some of the many stocks I write about here on the blog.