Stock Picks Bob's Advice
Friday, 4 June 2004
"Trading Transparency" CMN
Hello Friends! Well that nickel was just burning a hole in my pocket. With the sale of a portion of KNSY earlier today, that allows me per my strategy to add another position as I work towards my 25 position portfolio.
I came across Cantel (CMN) which I have reviewed elsewhere in the blog. CMN is having a nice day trading at $20.00, up $.84 on the day or 4.38%.
With that in mind, I picked up 300 shares this afternoon at an average price of $20.01. They reported great earnings results today, and hopefully, this stock will have enough price momentum to continue its upward trajectory!
Thanks so much for stopping by! Please remember that I am an AMATEUR investor and that you should consult with a PROFESSIONAL investment advisor before making any decisions based on information presented on this website.
If you have any questions, comments or words of encouragement, please feel free to email me at email@example.com
"Trading Transparency" KNSY
Hello Friends! Well a good Friday morning to all of you. Kensey Nash Corp (KNSY) has done well for me! This morning, I sold 75 shares of my remaining 300 shares at $36.01/share. This leaves me 225 shares. These 300 shares were purchased 12/3/03 at a cost basis per share of $22.52 for a gain of $13.49/share or 59.9%. (Our target for this second sale was a 60% gain.) I sold my first 100 shares of KNSY on 1/26/04 at $27.53 which was a gain of $5.01 or 22.2%. Thus, I now have a nickel in my pocket waiting to be spent!
We are working our way back to the 25 position plan for the portfolio. After I get there, I will sell portions of stocks at gains and apply to the Margin balance...only buying a new stock when one has been sold at a loss, followed by a gain...do you follow?
Anyhow, have a great day. I will keep you posted. Remember I am an AMATEUR investor...so check things out yourself and consult with your investment advisors before acting on any information on this website! Write me at firstname.lastname@example.org if you have any comments or questions!
Thursday, 3 June 2004
June 3, 2004 Bebe Stores (BEBE)
Hello Friends! Thanks so much for stopping by and visiting. Remember that I am an AMATEUR investor, so PLEASE do your own investigation of all stocks discussed on this website and PLEASE consult with your investment advisors before making any investment decisions. I worry sometimes about talking about stocks because I CANNOT be responsible for any decision you make but I DO like to share my thoughts on current stocks of interest in the market! As always, if you have any questions, comments, or words of encouragement, do not hesitate to email me at email@example.com Be warned, that I may use your letter in the blog available to the public.
Anyhow, I came across Bebe Stores (BEBE) today while scanning the lists of greatest percentage gainers. BEBE is currently, as I write, trading at $21.17, up $1.06 or 5.27% on the day (by the time I finished up writing the post, the market was closed and BEBE closed at $20.44, up only $.33 or 1.64%...but the numbers look nice so I have stayed with this pick!). I do NOT own any shares nor do I have any options or leveraged positions in this stock. According to cnn.money, BEBE's principal activity "...is to design, develop and produce a line of contemporary women's apparel and accessories."
If you have been reading this blog for awhile, or if you follow any retail investments, one of the MOST important numbers that can be reported about a retail venture, besides their earnings of course, is their SAME STORE SALES. (sorry about shouting). This morning, before the open in New York, BEBE reported May same store sales results
. For stores open at least a year, sales increased 10.2%. In addition, they RAISED estimates for the fiscal fourth quarter ending in June, from $.11/share to $.15 to $.18/share. These are BOTH great things to help a stock move higher...and higher is the way this stock has been moving today!
What about the latest quarter results? On April 22, 2004, BEBE announced 3rd quarter results
. For the quarter ended March 31, 2004, net sales were $83.6 million, up 21.6% from the $68.8 million reported a year earlier. Same store sales for the quarter came in up 16.7% (!). Diluted earnings per share came in at $.21/share compared to just $.01/share in the prior year.
How about longer term? If we look at Morningstar.com "5-Yr Restated" financials
, we can see that revenue has grown steadily with $201 million in revenue in 1999 increasing to $344 million in revenue in the trailing twelve months.
Earnings, however, have been a bit more erratic. They peaked at $.78/share in 2000, dropped to $.49/share in 2003, and have recently been picking up again.
Free cash flow looks nice with $16 million in 2001, $28 million in 2002, $27 million in 2003, and $40 million in the trailing twelve months.
As for the balance sheet, all of the "free cash flow" is adding to the rich $185.6 million in cash which can cover BOTH the current liabilities of $40.7 million AND the long-term liabilities of $14.7 million, more than 3x over! In addition, BEBE has $31.4 million in other current assets.
How about Valuation? Looking at "Key Statistics" from Yahoo
, we can see that this is a small cap with $791.6 million in market cap. The trailing p/e is 28.27 with a forward p/e (fye 30-Jun-05) of only 22.46. The PEG is reasonable at 1.17, with a Price/Sales not too out of line at 2.18.
BEBE has 39.02 million shares outstanding with only 8.40 million of them that float. There appear to be a LOT of those shares out short, with 2.19 million reported as of 5/10/04. This represents 26.04% of the float or 6.75 trading days. In my opinion, anything over 3.0 stands a decent chance of leading to a "squeeze"...and if the good results continue...well we shall see!
No cash dividend is paid, and the stock split 3:2 recently, in fact on 5/6/04!
What about Technicals?
This stock was trading lower between August, 2001, and October, 2002, when it bottomed at around $6.50/share. Since that time, it has been trading above its support line, and the graph looks nice to me.
What do I think? Well, I wish the stock hadn't closed off its highs...but I like the same store sales numbers, the valuation is reasonable, the balance sheet is impeccable, the PEG is just over 1.1, and the graph looks nice. There really isn't much that I don't like about this stock...it is just that I don't have any money to buy it!
Well, thanks again for stopping by. Please email me if you have any comments or questions at firstname.lastname@example.org
Wednesday, 2 June 2004
A Reader Writes "Just out of High School. How do I start?"
Hello Friends! Thanks again for stopping by. I was pretty excited this morning checking the mailbox (I felt like Steve Martin in the Jerk when he got his Phonebook!)...and had an email with an inquiry.
Ross D., from Anchorage, Alaska writes:My initial investment is going to be around $500-$1,000 and add in around $300 monthly into my investments (split them up accordingly). I came across sharebuilder.com just a few minutes ago and found out that Wells Fargo offers their service too. Again, not sure if I should spread things around or do everything under one house. Seems like a good concept, but wouldn't buying the stocks individually be better? Also, is it good to have only one account versus having multiple accounts with different brokers?
First of all Ross, I am NOT a professional investment advisor so I cannot give you specific advice on equities. But let me share with you my own start in investing...I am afraid to say that was about 35 years ago (!)...when I had a sharebuilder account with Merrill Lynch. I don't believe they still have this...but I may be wrong on that.
In general, if you are starting an account, I would stay with ONE brokerage house as paperwork gets tricky enough as it is...I like starting with about $1000 and adding $300/month. What I would do is start with the $1000, buying a single investment for about $750, and leaving $250 in a money market. Then I would each month place $250 in a total of four other investments, alternating each investment each month...with a cycle of four months. After twelve months, you should have $750 in each of five investments. I would continue rotating the five investments over a 5 month period of time until such time as each investment has $5000 value. If you do the math, at this rate, this will take several years...adding about $600/yr to each investment. You will also be building a money market fund, which I would draw upon if buying an additional position.
How do you manage this? Probably would set up a mental stop (that is in your mind keep a stop) about 10% below your purchase price. If any of your investments are down 10% from their total cost...then I would liquidate the investment, and purchase a DIFFERENT stock adding sufficient $'s from the money market to have the new investment pretty equal to the others. I probably would not sell any portion of the holdings until they were at a $5,000 level, then consider starting to sell a portion of the holdings when they hit a sell point...you can use the "sell 1/4 on a 1/3 gain" strategy that I use in my trading account.
You asked about currency investments and quite frankly, that is a sophisticated investment area that I know little about....so if you do that, good-luck!
Also, what about Wells Fargo vs. a discounter like Scott-Trade? I do not have any experience with Scott, but do with Fidelity and Schwab that I like. I would prefer to see you with a moderate discounter like Fidelity than a deep-discounter like Scott...mainly because you are a NEW investor and might need some of the additional services that are probably available with the less-than-deep discounters. Just a thought.
I am not sure if all of my discussion is helpful to you. Please remember that I am a fellow amateur investor so I would suggest you discuss these ideas with a professional investment advisor.
Please let me know how things work out and if you have any questions about my blog or website! Again, thanks for writing.
June 2, 2004 Micronetics (NOIZ)
Hello Friends! Was pretty busy today and finally towards the end of the day got around to working the lists of greatest percentage gainers. I sold 75 shares of CYTC thinking that was my SECOND sale...approaching the 60% gain level...but when writing it up realized it was my THIRD sale....so I shall skip the 90% sell point and look forward to a solid 120% gain before making the next sale. Anyway, I still worry about anyone thinking I am giving out investment advice for THEM...so PLEASE remember to do your own investigation of all stocks discussed on this blog as I am an AMATEUR investor....and you need to discuss these investments with YOUR professional investment advisors before taking any action on the equities discussed.
I came across Micronetics (NOIZ) which was having a GREAT day today, and in fact closed at $9.33, up $2.04 or 27.98% on the day! I DID purchase 400 shares of NOIZ just before the close of trading at $9.40, so I am actually DOWN $.07/share already! I generally AVOID stocks under $10 as the % volatility almost always causes me to sell at an 8% loss fairly quickly....but the numbers looked nice, and I decided to give them a try! According to the Yahoo "Business Summary", NOIZ "...manufactures microwave and radio frequency (RF) components and integrated subassemblies used in a variety of commercial wireless and defense and aerospace products, including satellite communications, electronic warfare and electronic counter-measures."
This morning, just before the open, NOIZ reported 4th quarter and year 2004 results
. For the quarter ended March 31, 2004, net sales came in at $13.8 million, an increase of $3.2 million or 29.6% from $10.7 million the prior year same quarter. For the 4th quarter, net income came in at $480,275 or $.11/diluted share compared to net income the prior year of $223,241 or $.05/dilued share, an increase of 115%. The "street" liked the report and thus the nice price move.
Looking at the Morningstar.com "5-Yr Restated" financials
, we can see the fairly steady revenue growth from $4.5 million in 1999 to $12.7 million in the trailing twelve months.
Earnings, while slightly erratic, have increased from $.08/share in 1999, to $.28/share in the trailing twelve months. Extrapolating the latest quarter gets us to a level of $.44/share.
There has unfortunately been negligible free cash flow with $0 reported in 2001, $(1) million in 2002, and $0 million in 2003.
Balance-sheet-wise, the company looks fine with $1.4 million in cash and $6.2 million in other current assets balanced against $1.5 million in current liabilities and $1.0 million in long-term liabilities.
Looking at "Key Statistics" from Yahoo
, we can see that this is a TINY company, truly a "micro-cap" stock with a market cap of $39.50 million. The trailing p/e is 33.93, but NO PEG is reported, and the Price/sales ratio came in at 2.44.
There are only 4.23 million shares outstanding with 3.00 million of them that float. Currently there are only 17,000 shares out short as of 5/10/04, representing 1 trading day or 0.57% of the float.
No cash dividend is paid, and no stock dividend is reported on Yahoo.
How does the graph look?
Looking at a Point & Figure chart from Stockcharts.com, we can see that NOIZ actually traded LOWER through much of 2000, through September, 2003, when it broke through a resistance level at about $3.50. The stock has traded higher since that time...and looks strong technically to me.
What do I think? Well THIS one I liked enough to actually BUY some shares...I sold some CYTC shares to allow me to add a position. (And I HONESTLY thought that was a SECOND sale!). What I don't like is that this is a micro-cap stock under $10/share, and I will likely see this stock retrace some of its great gains tomorrow...unless we can get a bit of a cushion on this purchase...there is a significant chance I get stopped out around 8%. The earnings were impressive, the balance sheet is fine, and frankly, the valuation doesn't look bad.
Thanks so much for stopping by! Please drop me a line at email@example.com if you have any comments, questions, or words of encouragement! Have a great evening everyone!
Posted by bobsadviceforstocks at 3:48 PM CDT
Updated: Wednesday, 2 June 2004 3:50 PM CDT
June 2, 2004 "Trading transparency" CYTC, NOIZ
Hello Friends! I just made a couple of quick trades in my trading account that I wanted to share with you. I sold 75 shares of CYTC at $22.90, 1/4 of my 300 share position. My original purchase was on 1/29/04 at a cost basis of $14.86/share. This reperesents a gain of $8.04 or 54.1%. This is my third sale (frankly I thought it was my second!), so we will need to wait until the stock is up 120%, to make the fourth sale. The first sale was 100 shares at $18.6, and another 100 shares on 4/2/04 at $22.61.
Also, I bought 400 shares of NOIZ, Micronetics, at a cost of $9.40/share. I will be writing this one up shortly!
Thanks so much for stopping by! Please remember to consult with your own investment advisors before taking any action based on anything on this blog. If you ahve any questions or comments, please feel free to email me at firstname.lastname@example.org
Tuesday, 1 June 2004
June 1, 2004 SRA International (SRX)
Hello Friends! It is a bit after 5 pm here in Wisconsin, and actually it is my stock club night. I am a member with bunch of great guys (and one great lady!) who meet monthly trying to divine the future of our investments. (Some of them occasionally stop by here so I will refrain from anything I might regret!) Let me just say, that I have about 41 minutes to fire off this entry! Remember, as ALWAYS, that I am an AMATEUR investor, these are just my observations on current stocks of interest, so PLEASE consult with your investment advisors before making any investment decisions based on what you read here!
I came across SRA International (SRX) a few moments ago...scanning the lists of greatest percentage gainers. I do NOT own any shares nor do I have any options or other leveraged positions. SRX did have a nice day today closing at $41.80, up $3.03 or 7.82% on the day. According to the profile on CBS Marketwatch, SRX's "...principal activity is to provide information technology services and solutions to the U.S. Federal government organization. The services provided include strategic consulting, systems designing, development, integration and outsourcing and operations management."
On May 3, 2004, SRX announced 3rd quarter 2004 results
. Revenue was up 37% from the prior year to $160 million. Net income increased 42% to $10.2 million. And diluted earnings per share for the quarter ended March 31, 2004, came in at $.37, up 23% from the prior year's figure of $.30/share. In addition, they raised fiscal year 2004 guidance. All of this was bullish for the stock!
If we look at the "5-Yr Restated" financials
on Morningstar.com, we can see that revenue, which was fairly flat between 1999 and 2001, increasing from $291.9 million in 1999 to $312.5 million in 2001, took off after that...increasing to $361.2 million in 2002 and $450.4 million in 2003 and $518.5 million in the trailing twelve months.
Earnings on Morningstar.com start in 2003 where they were at $1.25, increasing to $1.27 in trailing twelve months. However, from the recent quarter, we can see that the earnings are growing quicker than that!
Free cash flow has improved from $6 million in 2001 to $34 million in 2003.
The balance sheet is GORGEOUS with $189.1 million in cash, way more than enough to pay off both the $98.7 million in current liabilities and the smallish $5.9 million in long-term liabilities. In addition, Morningstar.com reports that they have an ADDITIONAL $153.8 million in OTHER current assets! With the growing free cash flow, this one looks financially healthy to me.
What about valuation? Looking at "Key Statistics"
from Yahoo.com, we can see that the market cap is $1.08 billion, the trailing p/e is 31.19, but the forward p/e (fye 30-Jun-05) is only 25.03. The PEG isn't bad at 1.26 (imho), and the Price/Sales is reasonably priced at 1.78.
Yahoo reports 25.78 million shares outstanding with 14.80 million of them that float. There are a LOT of shares out short (from my perspective) with 515,000 as of 5/10/04...representing 3.48% of the float, but more importantly representing 7.923 trading days of short interest. (I use 3.00 trading days as a cut-off...I am not sure what other people use...but this seems to be fairly predictive of the chances of observing a "squeeze".)
Yahoo reports no cash dividend and no stock dividend is reported.
What about Technicals?
If we look at a recent "Point & Figure" chart on SRX, we can see that the stock was trading "sideways" through much of 2002 and early 2003. In April, 2003, the stock broke through a resistance level at around $6 and has been trading higher since. In my humble opinion, this graph looks just fine!
What do I think. Well, first of all I don't have any money to invest...you know the old story. But otherwise it looks nice. I guess it is a bit depended on the Federal Government for business....and I am not sure about whether a change in Administrations, that is the Democrats taking over the White House, if that is the case, would mean any change for them. Other than that, things look nice. They have a great earnings record, are raising current estimates, have a wonderful balance sheet, reasonable PEG and Price/sales....and a nice graph to boot! What is there NOT to like?
Thanks again for stopping by! Please feel free to stay awhile and browse the myriad of posts...and please email me at email@example.com if you have any comments, questions, or words of encouragement!
Monday, 31 May 2004
May 31, 2004 "Thoughts on the Sell Side"
Hello Friends! Thanks again for stopping by and I hope you all are having a good Memorial Day. Kind of rainy here in Wisconsin, so I am not sure how the Parade will turn out.
I was thinking this weekend about my "sell strategy" and just as I have some "rules" about selling on the upside, I think that this account is not quick enough to respond to downturns in the market.
First of all, I need to stay with the 8% limit on losses on all new purchases. That seems to be a good way of preserving capital.
Second, once a portion of a stock has sold for a gain, it is important to sell it before it becomes a loss. That is, sell at break-even if I have sold a portion at about a 30% gain.
Next, what about the stocks that are up 60%, 90%, or more? I haven't refined the strategy yet....but what about allowing them to retrace 50% of their gain before selling? For instance, a stock that has had a portion sold at 60% should be allowed to retrace to 30% gain, and a stock with a portion sold at 90%, should be sold before it goes below a 45% gain if possible.
This allows greater flexibility for the issues that make large gains, but also allows for me to sell them with gains present...quicker than going back to break-even.
What do you think? This is my plan for now.
If you have any comments, questions, or other matters you would like to write about, please email me at firstname.lastname@example.org
Have a happy shortened trading week everyone!
Saturday, 29 May 2004
"The Annual Review" Looking back on the week of May 26, 2003
Hello Friends! It is a RAINY Saturday here in Wisconsin. I hope you all are staying nice and dry today. This is now the third week that I have had the pleasure of looking back on selections from a YEAR ago! I think this is VERY helpful to understanding the effectiveness of this process on this blog. I don't just want to put names out in cyberspace without finding out whether they actually did ok! As always, please remember that I am an AMATEUR investor, so do your own investigation of all of these stocks, and PLEASE consult with your own professional investment advisor to make sure they are appropriate and timely for you.
On May 27, 2003, I posted Westcorp (WES) on Bob's Advice
at a price of $24.41. WES closed at $42.95 on 5/28/04 for a gain of $18.54 or 76%.
How about recent earnings? On April 13, 2004, WES reported 1st quarter 2004 results
. First quarter net income was up 84% to $43 million, with EPS gaining 38% to $.83. In addition, WES raised guidance for 2004 results. This was a very nice report!
Dearborn Bancorp (DEAR) was selected for Stock Picks
on 5/27/03 at a price of $22.50. DEAR closed on 5/28/04 at a price of $26.589 for a gain of $4.09 or 18.2%. However, I just realized they paid a 5% stock dividend in 12/03, so our return works out to 24.1% for this period.
On 4/20/04, DEAR announced 1st quarter 2004 results
. DEAR announced earnings for the quarter of $1.2 million or $.36/diluted share up 102% from the $580,000 or $.19/diluted share last year. In addition, just a few days ago, on 5/19/04, DEAR declared a 5% stock dividend
. This will not actually increase our return, but this was also declared in 12/3/03...so this is the second 5% stock dividend this year....so our actual cost on the "pick" was $21.43....and our ACTUAL return was 24.1% during this period!
On 5/28/03, I posted Abercrombie and Fitch (ANF)
on the blog at a price of $29.07. ANF closed at $36.43 on 5/28/04 for a gain for the year of $7.36 or 25.3%.
On May 11, 2004, ANF reported 1st quarter 2004 results
. Net sales for the thirteen week period ended May 1, 2004, increased 19% to $411.9 million from $346.7 million last year. On the downside of the report the same store sales figure were FLAT. This is the only part of the story that disturbs me. I really insist on same store sales gains when thinking about a retail stock for possible investment. Anyhow, earnings on a fully diluted basis DID jump 19% to $.31 vs $.26 last year....but again, with same store sales FLAT, this would suggest that the growth in revenue and earnings was by ADDING additional outlets....and not by what I would call internal growth.
May 28, 2003, found me posting Krispy Kreme (KKD)
on Stock Picks at a price of $34.35. As those of you who follow the market know, KKD has recently come under pressure due to lackluster results and possibly feeling the effect of the Atkins "low-carb craze". (I have been watching my carbs on and off like lots of ineffective dieters!). KKD closed at $21.47 on 5/28/04 for a LOSS of $(12.88) or (37.5)%.
On May 25, 2004, KKD reported 1st quarter results
. The company reported that it LOST $(24.4) million or $(.38)/share vs a profit of $38.8 million or $.61/share last year. Revenue did rise 24% to $184.4 million, with same store sales up 4%. So all was not bad in the report...but the loss (based on a write-off)...is still disturbing.
Medical Staffing Network (MRN) was posted on Stock Picks
on 5/29/03 at a price of $7.52. MRN closed at $6.59 on 5/28/04 for a loss of $(.93) or (12.4)%.
On May 5, 2004, MRN announced 1st quarter 2004 results
. Revenues came in at $106.4 million a DECREASE of 26.1% from first quarter 2003 revenues of $144.0 million. Loss came in at $(.6) million or $(.02)/share vs. net income of $5.3 million or $.17/share in the first quarter 2003. All I can say is that these results look DISMAL. (At least from my "earnings momentum" perspective).
Hovnanian Enterprises, the home-builder, was posted on Stock Picks
on 5/29/03 at a price of $56.29. HOV had a 2:1 stock split in March, 2004, givin the pick an effective price of $28.15. HOV closed 5/28/04 at a price of $35.30 for a gain of $7.15 or 25.4%.
On March 1, 2004, HOV reported 1st quarter 2004 results
. Total revenues increased 24% to $775.2 million from $627.6 million last year. Net income came in at $57.7 million or $1.74/diluted share vs $44.8 million, or $1.35/diluted share last year. These were nice results...although analysts had expected a bit more!
On May 29, 2003, I posted Dollar General on Stock Picks Bob's Advice
at a price of $17.80. DG closed at $19.40 on 5/28/04 for a gain of $1.60 or 9% over the year.
Just two days ago, on 5/27/04, DG reported 1st quarter 2004 results
. Net sales for the first quarter increased 11.4% to $1.75 billion from $1.57 billion. Just as important, same store sales during the period increased 3.0%. Net income came in at $67.8 million, a 12.5% increase over the $60.3 million last year, or $.20/diluted share this year vs. $.18/diluted share last year. These are o.k. results but not exactly spectacular, imho.
FINALLY, Eon Labs (ELAB) was posted on Stock Picks
on 5/30/03 at $29.55. ELAB closed on 5/28/04 at $75.60 (!) for a gain of $46.05 during the past year or 156%. Now the SAD part of this is that I DID own some shares but got "shaken out" on some stories I read on the internet...will have to stick tighter to these stocks in the future!
On April 22, 2004, ELAB reported 1st quarter results
. Net sales came in at $104.2 million, a 47.1% increase from the comparable quarter in 2003. Net income came in at $32.3 million, compared to $15.1 million the prior year an increase of 113.9%. And diluted earnings per share came in at $.71/share (or $.58/share excluding a one-time gain of $10 million for a payment received in litigation), compared to $.33/share last year. These are GREAT results and as you can see, the stock has responded accordingly!
So how did we do this week a year ago? Over the past year these stocks have returned an average gain of 33.2%. We had two stocks declining (KKD and MRN) with losses of (37.5)% and (12.4)% respectively, and seven stocks gaining. This was a pretty nice performance! However, as you know, past performance is NO guarantee of future performance....but maybe, just maybe we are onto something on this blog!
Thanks so much for stopping by! I hope you have a safe and happy Memorial Day Weekend! If you have any questions, comments, or words of encouragement, please feel free to email me at email@example.com
Friday, 28 May 2004
May 28, 2004 Wendy's International (WEN)
Hello Friends! We made it to Friday! I sure appreciate all of you who come and visit here. If some of your are regulars, please email me at firstname.lastname@example.org and let me know your own approach to investing and whether you find the information on this website helpful in any fashion! Also, your comments, suggestions, questions, and words of encouragement are as always very much appreciated! Please remember that I am an AMATEUR investor, so do your OWN investigation of all investments discussed on this website, and please consult with your PROFESSIONAL investment advisors to make sure investments discussed are appropriate and timely for you!
I came across Wendy's Intl (WEN) on the list of greatest gainers this morning. As I write, they are trading at $37.43, up $1.29 or 3.57% on the day. I do NOT have any shares or other leveraged positions in this stock. According to Yahoo, Wendy's is "...primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service and fast-casual restaurants." They sell hamburgers, in other words, but also other items on their menu....hmmm...last time I was there they had some new interesting salads, their great chili....oh well it is getting close to lunch so let's not talk about food! My stomach is growling. We do have a couple of other restaurants on this blog including Frisch's, Red Robin Gourmet Burger, and Panera Bread to mention a few.
Earlier this month, on May 3, WEN announced April 2004 same-store sales results
. They announced that their U.S. Franchise-owned restaurant sales in the month ending May 2 were up 6.3 to 6.6%. Tim Hortons coffee and donut shuts had same-store sales up 9.0-9.2% in Canada, while those in the U.S. jumped 12.4%. These are pretty solid results!
Looking for the latest quarterly report, I found that Wendy's reported 1st quarter 2004 results
on April 22, 2004. Total revenues increased 20.3% to a record $835 million. Net income came in at $52.8 million for the quarter vs. $43.9 million last year. On a diluted earnings per share basis, this came in at $.45/share vs $.38/share last year.
Longer term, if we examine the Morningstar.com "5-Yr Restated" financials
, we can note the steady revenue growth from $2.1 billion in 1999 to the latest $3.1 billion in 2003.
Equally nice, imho, the earnings have also steadily grown from $1.32/share in 1999 to the $2.05/share level in 2003.
Free cash flow, has been positive lately, with $6 million reported in 2001, increasing to $88 million in 2003. The balance sheet, per Morningstar, looks a little light on current assets with $195.9 million in cash and $266.8 million in other current assets vs. $528.5 million in current liabilities and $876.9 million in long-term debt. This lightness in the area of current assets is a bit of a concern, but with the steady free cash flow at almost $100 million/year, this does not appear to be a significant issue for WEN in my opinion. But review the numbers yourself and see what you think!
What about valuation? If we look at the "Key Statistics"
from Yahoo, we can see that the trailing p/e on this large cap stock is only 17.76. The forward p/e (fye 28-Dec-05) is even nicer at 14.44. The PEG is reasonable at 1.18, with a price/sales almost as nice at 1.25. The valuation looks pretty reasonable to me!
Currently there are 114.08 million shares outstanding with 106.10 million of them that float. (For comparison McDonald's has 1.26 BILLION shares outstanding!) The short interest, as of 5/10/04, isn't impressive with 674,000 shares out short representing 0.64% of the float or 0.836 trading days. And this is DOWN from the prior month's 1.09 million shares out short.
The stock DOES pay a dividend of $.48/share yielding 1.33% and the last stock split reported by Yahoo was a 5:4 split in May, 1986.
If we look at a recent "Point & Figure" chart on Wendy's:
We can see that this stock has been trading fairly steadily higher since March, 2000 when it bottomed at around $14.00/share.
What do I think? Hey, I could use a nice burger right now! But seriously, personally, I am out of the market for buying stock...I am back SITTING ON MY HANDS....waiting for an opportunity to buy a NEW stock when I can sell a portion of an existing postion at a gain....but overall, I like WEN just fine! The valuation is nice. The same store sales figures are great. The balance sheet is a tad weak in the assets department, but I do not think this should be overblown...but maybe watch these figures as the Morningstar site gets updated.
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Have a GREAT weekend everyone!
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