Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

I was hoping to find a new name today, so scanning the list of top % gainers on the AMEX, I came across Cubic (CUB), a name which has appeared on the top % gainers several times the past few weeks.  I do not own any shares or options of this company.  As I write, CUB is trading at $32.14, up $1.09 or 3.51% on the day.

I would like to share with you some of the information that has resulted in my assessment that

CUBIC CORPORATION (CUB) IS RATED A BUY

What exactly does this company do?

According to the Yahoo "Profile" on CUB, this San Diego-based company

"...engages in the design, development, manufacture, and installation of defense electronics and transportation fare collection systems. Its Defense segment provides customized military range instrumentation systems, tactical engagement simulation systems, firearm simulation systems, communications and surveillance systems, surveillance receivers, power amplifiers, and avionics systems. It also offers training mission support, computer simulation training, distributed interactive simulation, development of military training doctrine, and field operations and maintenance services."

How did they do in the latest quarter?

On August 1, 2007, CUB reported 3rd quarter 2007 results. Sales for the quarter ended June 30, 2007, increased 9% to $233.7 million from $214.9 milllion in the same period last year.  Net income grew more at $11.2 million or $.42/share up 87% from $6.0 million or $.22/share last year.

How about longer-term results?

Reviewing the Morningstar.com "5-Yr Restated" financials on Cubic, we see that revenue has been steadily increasing from $560 million in 2002 to $821 million in 2006 and $871 million in the trailing twelve months (TTM).  Earnings, however, have been more erratic, increasing from $1.10 in 2002 to $1.40 in 2003 and 2004.  They dropped to $.20/share in 2005, only to rebout to $.30/share in 2006 and $1.40 in the trailing twelve months.

The company does pay a  dividend which was $.10/share from 2002 to 2003, then increased to $.20/share in 2004 through the TTM.   The number of shares outstanding has remained extremely stable at 27 million in 2002, and 27 million reported in the TTM.

Free cash flow which was $(35) million in 2004, turned positive at $46 million in 2005, dipped to $22 million in 2006, and grew to $95 million in the TTM.

The balance sheet appears solid with $76 million in cash and $389 million in other current assets.  This total of $465 million, when compared to the current liabilities of $172 million yields a healthy current ratio of 2.70.

What about some valuation numbers?

Looking at Yahoo "Key Statistics" on Cubic, we find that this is a 'small cap' stock with a market capitalization of only $856.34 million.  The trailing p/e is a reasonable (imho) 22.76 with a forward p/e (fye 30-Sep-08) estimated at 21.09.  The PEG ratio is a reasonable 1.06.

According to the Fidelity.com eresearch website, valuation is also reasonable when measured by the Price/Sales (TTM) ratio.  CUB comes in with a Price/Sales (TTM) of 0.97 compared to the industry average of 1.45.  However, profitability, as measured by the Return on Equity (TTM) is low at 9.84% compared to the industry average of 28.06%.

Finishing up with Yahoo, we can see that there are 26.72 million shares outstanding with only 14.05 million that float.  As of 7/10/07, there were 1.45 million shares out short representing 7.7 trading days of volume, more than my own '3 day rule' for significance in the short ratio.  With good news, this stock may be subject to a short-squeeze with short-sellers scrambling to cover their sales with purchases.

As noted above, the company pays a small divided with $.18 reported by Yahoo (I noted $.20/share on Morningstar),  calculated to a 0.5% forward annual dividend rate. 

The last stock split was a 3:1 stock split on May 1, 2002.

What does the chart look like?

Reviewing the StockCharts.com 'point & figure' chart on CUB, we can see that the company has had a very erratic price movement since 2002.  Since late 2006, the chart appears to be moving higher.  

Summary:  What do I think?

Well, I like this stock.  If I were purchasing shares today, this is the kind of company I would be buying.  In the meantime, I shall be adding this to my 'vocabulary' of stocks to watch, and wait for the appropriate signal to purchase.

Summarizing, the company is moving higher today, reported good earnings just last week, has a 5 yr record of solid revenue growth with some definite earnings volatility.  Free cash flow is strongly positive, the outstanding shares are rock solid and the company pays a small dividend.  Finally, the balance sheet looks great and valuation is reasonable with a moderate p/e, a PEG just over 1.0, a low Price/Sales but an unimpressive Return on Equity statistic.  In addition, the chart looks moderately encouraging.

Thanks so much for stopping by and visiting!  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.  If you get a chance, be sure and visit my Stock Picks Podcast Website, check out my Covestor page which reviews my actual trading portfolio performance, and my SocialPicks page where all of my stock picks from January, 2007, and more recent, have been recorded and evaluated.

Bob