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What a difference a day makes! I suppose in retrospect when I noted that ALL 15 of my stocks had declined, I should have figured that at least for the short-term that was some sort of climactic sell-off. At least for now, the market is over-sold and appears to be rebounding with the Dow up 118 points at 13,160.29 and the Nasdaq up 26.91 points at 2,527.55 with several hours left in the trading day.
I was looking through the list of top % gainers on the NASDAQ this morning and came across an 'old favorite' of mine, MICROS Systems (MCRS) which as I write is trading at $59.50, up $3.99 or 7.19% on the day. I say 'old favorite' because I first wrote up MICROS on Stock Picks Bob's Advice on October 28, 2005, when the stock was trading at $45.82. Thus the stock has appreciated $13.68 or 29.9% since posting. I do not own any shares or have any options on this company.
MICROS SYSTEMS (MCRS) IS RATED A BUY
Since we are discussing prices of this stock and my last write-up, let's take a look at a "point & figure" chart on MICROS from StockCharts.com:
On the chart we can see that the stock reached an intermediate peak of $55 in January, 2006, only to sell-off to $36 in August, 2006. In that same month the stock turned around and broke through resistance on the upside and has resumed its upward trek since. The stock appears to be solidly in an upward move trading above support lines.
What exactly does the company do?
According to the Yahoo "Profile" on MICROS (MCRS), the company
"...engages in the design, manufacture, marketing, and servicing of enterprise information solutions for the hospitality and specialty retail industries."
What about the latest quarter?
As is so often the case, and was the case when I first wrote up MICROS in 2005, what moved the stock higher today was the report of earnings results, in this case 4th quarter 2007 results, which were announced after the close of trading.
For the quarter ended June 30, 2007, revenue came in at $221.6 million, up 15.5% over the prior year same period. GAAP net income came in at $785.7 million, up 15.7% over the prior year. GAAP diluted eps came in at $.66, up 24.5% over the same period last year.
The company beat expectations for the quarter. Analysts had been expecting earnings of $.49/share on revenue of $202.7 million. In addition, the company raised guidance for fiscal 2008 to earnings of $2.59 to $2.62/share, on revenue of $910-$915 million. Analysts on average had been expecting earnings of $2.56/share on revenue of $905.5 million.
For an earnings report, I like to call this a "trifecta-plus" which for me means a company reports strong revenue growth, strong earnings growth, beats expectations and raises guidance. And the street liked what it read as well and the stock came out of the gate charging higher this morning!
What about longer-term results?
If we review the Morningstar.com "5-Yr Restated" financials on MICROS, we can see what I consider to be a very 'pretty' picture! Revenue has been steadily increasing from $372 million in 2002 to $679 million in 2006 and $756 million in the trailing twelve months (TTM).
Earnings during this period increased by six-fold from $.30/share in 2002 to $1.60/share in 2006 and $1.80 in the TTM. During the same period, the outstanding shares increased from 35 million in 2002 to 39 million in the TTM, a dilution of a little over 10%, quite acceptable to me.
Free cash flow has been positive and growing with $63 million reported in 2004, increasing to $111 million in 2006 and pulling back slightly to $109 million in the TTM. The balance sheet appears quite solid with $301 million in cash, which by itself could cover both the $246.5 million in current liabilities and the $29.6 million in long-term liabilities combined.
Calculating the current ratio, the total of current assets works out to $573 million, which when compared to the current liabilities of $246.5 million, yields a current ratio of 2.32.
What about some valuation numbers?
Reviewing Yahoo "Key Statistics" on MCRS, we can see that this stock is a mid cap stock with a market capitalization of $2.42 billion. The trailing p/e is a moderat 33.12, but the forward p/e is estimated at 18.65 (fye 30-Jun-08). Thus the PEG ratio, which takes into consideration the future growth in earnings in determining the richness in the price, comes out to a very reasonable 1.16 (I generally find PEG's between 1.0 and 1.5 to be reasonably priced).
In other measurements of valuation, according to the Fidelity.com eresearch website, the company has a Price/Sales ratio (TTM) of 2.84, well below the industry average of 6.02. There is a nice article by Paul Sturm at Smart Money on the importance of relative Price/Sales ratios, and MCRS does well in this regard.
In terms of profitability, Fidelity suggests MCRS is not quite as good as its peers, with the Return on Equity (TTM) coming in at 15.78%, under the industry average of 25.05%.
Finishing up with Yahoo, we find there are 40.52 million shares outstanding with 38.39 million that float.
As of July 10, 2007, there were 3.11 million shares out short. This works out to a short ratio (as of 7/10/07) of 7.4 trading days of average volume or 7.7% of the float. I personally use a '3 day rule' for significance, and at 7+ days, this is well above that, setting this stock up for a short squeeze, which may well be developing today as the company announces strong results attracting interest in the stock and buyers coming into the market driving the stock price higher.
No cash dividend is paid and the last stock split was a 2:1 stock split on February 2, 2005.
Summary: What do I think?
Well, as you probably can tell I like this stock a lot. I practically LOVE this stock :). But I don't own any shares :(. However, if I were in the market to be buying a stock today, this is the kind of stock I would be adding to my portfolio. Meanwhile, I shall keep it in my 'vocabulary' of stocks, ready to buy at the appropriate time.
Let me summarize a few of the findings. First of all the stock reported strong earnings with both earnings and revenue growth as well as beating expectations for both and then raising guidance for both! Longer-term the company has been steadily increasing revenue, earnings, and free cash flow, while keeping the outstanding shares relatively stable. The balance sheet is solid with the company with enough cash to pay off all liabilities--both short-term and long-term!
Valuation-wise, the p/e is a tad rich in the 30's, but the PEG is just over 1.0. The Price/Sales is good compared to other companies in the same industry, but the Return on Equity is a bit weak. In addition there are lots of short-sellers who appear to be betting the wrong way on this stock.
Finally, the chart looks great, moving higher without appearing over-extended. This stock belonged in the blog in 2005 and deserves a spot in 2007!
Thanks again for dropping 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 Page where I discuss some of the stocks I write about here on the blog. In addition, check out my Covestor Page which analyzes my actual trading portfolio performance relative to other registered invesotrs, and visit my SocialPicks Page which has an ongoing analysis of my blog since about January, 2007. Now you also have a lot of homework!
Regards and isn't it nice to have a market moving higher for a change?