Wednesday, 19 September 2007 - 12:20 PM CDT

Hey Bob. I would like to tell you again that I love the blog. But I am mainly writing this comment to ask you why you like LCQX? For one, it seems to be an expensive stock. It is trading at 32x earnings and 4.15x book value. In addition to this, it has a 1.83 p/e growth ratio. While they may be a good company, the fact that it is trading this high and it has heavy analyst coverage tells me that it has limited downside. So basically my question is, what appeals to you about this company?

Wednesday, 19 September 2007 - 2:58 PM CDT

Jeff,

You raise some excellent points on valuation. As you know, while I do take valuation into consideration, and all things being equal much prefer to see greater value, what attracts me about the company is the Morningstar Report, where revenue is seen increasing from $287.1 million in 2002 to $871 million in the TTM.  Earnings turned around from a loss of $(1.00) in 2002 to $.90/share in the TTM, and earnings have improved from $.30/share in 2002 to $.90/share in the TTM.

Free cash flow which was $-0- in 2004, increased to $15 million in the TTM and the balance sheet is solid.  The PEG on Yahoo is 1.5, the upper limit of my acceptable level. But you are right, Price/Sales is reported on Fidelity at 2.07, with an industry average of 1.12, and the same with the Price/Book at 4.39, well ahead of the industry average of 3.20.  So it isn't a big bargain.

But to answer your question, I like the consistency of the revenue, earnings, and free cash flow.  I was attracted to the 'recession-play' nature of the rebuilt auto parts market, and the nice chart as well. 

To include a stock, I am most concerned about the Morningstar page.  Valuation, quite frankly, is not as high a priority and isn't so far out of wack that I didn't think it deserved a place.

Your points are noted and appreciated.  Thanks for the kind words on the blog and your continued visits.

Bob  

Thursday, 20 September 2007 - 2:50 PM CDT

Yeah. I am kinda a stickler for valuation. But hey, I wish you the best of luck on this company. By the way, in case you are interested, Jamba Juice just announced that they are buying out 32 of their franchised california and nevada stores. So hopefully, that will lead to some price appreciation. -Jeff