Raymond, Is the analysis below the chart you posted worth nothing? Is this your analysis or someone else's?
stocktrendz.com
It's amazing that with this growth THQ still trades a p/e of 12. Growth in earnings has averaged above 100% and the company has no debt, strong cash flow, strong cash position, and a conservative management.
How conservative? Pretty darn conservative. Considering the fact that 12 million in cash flow was generated from "Provision for doubtful accounts," it's obvious THQ may be too conservative for its own good. Companies set aside a specified percentage of items received on credit as "Doubtful accounts." This is a provision for some cash they feel they won't ever recover.
In a recent quarter, 12 million that was set aside was actually recovered. Which means THQ set a huge amount of reserves than they needed. It's almost as if THQ is managing cash flows on an accrual basis!
Despite this "negative factor" (which really isn't a negative), THQ has everything in order. The company has 9 million float with management owning 6% of total shares outstanding which are 10 million. THQ's accounts receivable have fallen 67% from year ago periods to 10 million. Inventory is very low at 2 million reflecting Management's tight system.
THQ has $50 million in cash and a Current Ratio better than 2 to 1. Return on Equity was 49% and as mentioned earlier, the company has no debt. Profit Margin is at 10.5%. $37.4 million was generated by operating activities, according to the most recent 10-Q.
The company has roughly 4$ in cash per share and 1.78$ in cash flow per share. These are "discounts" one must consider when purchasing shares.
THQ's past performance is nearly unmatchable. The slight drawback is this: expected earnings are only expected to rise modestly, but THQ is known for beating expectations. So, in the long run, counting on them to beat expectations isn't a huge leap of faith.
Nonetheless, Wall Street wants to see it first before they "count" on it. And thus, we feel THQ is a value. It's grown the fastest in its industry, boasts one of the best management teams,has the least debt and one of the best balance sheets among similar securities. A p/e of 20-30 is more appropriate for this class act.
Also, are you saying that if someone sells a couple hundred thousand shares short it doesn't suppress the price? I didn't go the the Wharton School of Business but wouldn't heavy selling tend to drive prices down just as heavy buying tends to drive prices up? If so, a heavy short selling campaign would seem to be a fundamental event that would influence the interpretation of the trend line.
Regards,
Bob |
