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Thursday, 22 May 2003
May 22, 2003 New Century Financial (NCEN)
As you can see from my post yesterday on the main website page here (http://bobsadviceforstocks.tripod.com), I am an owner of New Century Financial...in my trading account. I have actually purchased this several times starting in 12/02 when I purchased 100 at an average cost of $23.41, 12/24/02 another 100 at an average cost of $26.68, and a final 100 at an average cost of $28.03. Following my own rules, I sold 100 on 5/5/03 for an average cost of $39.93. I had reached over a 50% gain in this issue in a short period of time and starting lightening up a little. So important to sell losses QUICKLY and sell gainers SLOWLY. Can only help to bias your results to the upside.

Anyhow, NCEN is having a GREAT day trading at $47.02 up $6.57 as we write at 9:22 am Central Time. What caused this pop is the fact that NCEN TODAY announced that in was INCREASING 2003 eps guidance from the $7.40-$7.50 range up to $8.75 to $9.25 range. Yes....this company is anticipating earnning about $9.00 per share (!!!) and sells even after this move for only $46. The company "is engaged in originatin, purchasing, selling and servicing subprime mortgage loans secured by first mortgages on single-family residences," according to the CNN.money site http://money.cnn.com/MGI/snap/A1434.htm (I hope that works for you to get to the profile section). Last quarter total revenues rose 61% to $181 million and net income rose 50% to $45.7 million.

Looking at Morningstar.com on this issue, we find
sequential growth in revenue from $98.6 million in 1997, $176.4 million in 1998, $233.9 million in 1999, $163.9 million in 2000 (which IS a drop which I would RATHER not see....but the rest of this is so good!), $293.3 million in 2001 and $511.1 million in the 'trailing twelve months'.

In addition, in today's announcement, NCEN indicated that they would maintain their $.10/share dividend (an added plus)...which means in effect a 50% increase in effective dividend return. This is a 50% increase because they announced a 3 for 2 stock split.

Unfortunately, Morningstar does not have the free cash flow report but interestingly does have the growth in revenue the last four quarters showing a 779.39%, 134.17%, 117.42%, and 86.84% increase in revenue each quarter. Pretty impressive!

For a final note, even AFTER today's big price rise, NCEN sells at a p/e ratio of only 6.18 suggesting tremendous value in their shares.

As a caveat, I know NOTHING about the management of this company...and would hold to an 8% stop loss on any purchase which I always suggest on all issues. If the stock should rise further....start selling some shares at a 40-50% range in gain....this is really an insurance of reducing your overall cost on any purchase. Good luck and happy investing.


Posted by bobsadviceforstocks at 9:38 AM CDT | Post Comment | Permalink

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