in NATS.....
To: HandsOn who wrote (112451)
From: Rande Is
Friday, December 3, 1999 9:38 AM ET
Reply # of 119497
ANALYSIS: [Nasdaq: NATS] Olympic Cascade/National Securities
The corporate website: nationalsecurities.com
The online brokerage website: nscdirect.com
I believe Olympic Cascade to be greatly undervalued at current levels. The online
brokerage website is nearing completion and is expected to be announced soon. The
quarterly earnings for the 4th quarter are also due immediately. So there is much in the
very near future that could change the landscape on this issue.
I am placing a higher valuation on NATS, based on its move into the online brokerage
business. This has proven to be an effective means at increasing earnings in the traditional
brokerages. For comparison purposes, I have selected Siebert Financial and AB
Watley, two similarly sized companies to Olympic Cascade, which does business
primarily under the name National Securities [NATS].
Without getting too deep into detailed financial analysis of online brokerage firms, I am
drawing a rather shallow conclusion. It is based on current revenues and the assumption
that online brokerages have [or will soon have] an increased bottom line over traditional
securities brokerages. The primary comparison for which to make this valuation is very
simple: Annual revenues, net income and current market capitalization.
Siebert Financial brings in about $34.1 million per year in revs and shows a recent
weighted net income of about $4 mil/yr. SIEB share price is $16.625, with a market
capitalization of $380,400,000!
A.B. Watley Group [ABWG] grosses about $19.2 million per year in revs, with a
weighted net income of $232 thousand per year. . .and has a market cap of
$99,200,000, when stock price is at $12.50/shr.
National Securities [Olympic Cascade] takes in $41 million per year in revs [weighted
on 9 months revenues ending 6/25/99] . . . MORE than Siebert and twice that of A.B.
Watley Group [and this income was without the online brokerage].
Now NATS showed a loss of about 21 thousand dollars in net income over the past
year. . . At a share price of $5.75, NATS has a market cap of just $9,710,000. .
.one-tenth that of A.B. Watley. Siebert's market cap is 39 times that of National
Securities.
So for National Securities to reach a similar valuation of ABWG, the NATS share price
would need to rise to $58.70 per share. And to reach a similar valuation to Siebert
Financial, NATS share price would need to reach a whopping $225.00.
When National Securities' new online brokerage goes live, it puts them into the same
sector division as ABWG, Siebert, JBOxford or Ameritrade. It is my opinion that they
will gradually deserve a similar valuation.
A market capitalization of $194,200,000 in one year is roughly twice that of the current
market cap of AB Watley, yet nearly half that of SIEB currently. Seeing how NATS
shows revenues higher than both companies, this seems in line with sector valuations
after the company has shown it can both manage its online brokerage and begin to show
profits.
This valuation represents a stock price of $115.00 per share. This is 20 times its current
price of $5.75.
Taking into consideration that the entire online brokerage sector is considered by many
to be undervalued at current levels, this entire scale of valuation could soon slide
northward. However, the valuations I am placing on NATS represent current sector
valuation. So at this point, my target prices for NATS are as follows:
** Within 12 months, the target is $100.00 per share.
** Within 3 months the target is $55.00 per share.
The stock should be selling at $27 per share right now, giving NATS a market
cap of just $45.63 million, and a price to sales ratio of about 0.65 as we await the
opening of their online brokerage.
See Summary below
NOTE: Whatever National Securities reports in their quarterly filing, which is due any
day, could change these valuations and targets one way or another.
However, it is doubtful that poor reported earnings could substantially devalue the
company, due to their coming online brokerage, which has proven to increase the
efficiency of securities brokers sector wide, which in turn increases their bottom line.
SUMMARY
So it is my opinion that National Securities / Olympic Cascade [NATS] is greatly
undervalued at current levels and carries minimal downside risk in the
intermediate to long-term horizon. It should be considered an "aggressive buy"
with a near-term target of $27, based on valuation alone.
Upon successful launch and satisfactory servicing of the new online brokerage
website, the intermediate target price is $55.00 per share. And upon evidence of
3 quarters of steadily increasing revenues, carrying through to at least 2
quarters of positive net income, my one-year target price on NATS is $100.00
per share, which I feel would bring it more in line with companies of similar size
and business model within the sector. . .while projecting sector valuations will
remain steady or grow slightly.
Rande Is
NOTE: I am not a licensed securities broker, but rather an independent
investor/trader. This analysis is to be considered a guide for speculative investors
only. The opinions expressed are my own. Everyone is urged to do their own due
diligence prior to placing any funds into a speculative stock. U DO DD!. . . .Don't
be a blind sheep! |
