Michael:
Great post. The attention to value, as measured by growth against price, is long overdue.
That said, I do not understand how "new economy" stocks with astronomical PEs can be reasonably considered without also evaluating and considering the companies with much lower PEs. I am particularly amazed given the recent trend towards the market's (stated) desire for "value."
How about a stock with TTM ROE of 37.09, TTM ROA of 19.44, TTM ROI of 30.82? How about average sequential quarterly (not annual) EPS growth for the last six quarters of 57%? The last 4 quarters EPS (Q1-Q4 1999) increased 51%, 36%, 42%, and 30%, respectively. This company will report earnings on 4-27 and is likely to report year-over-year revenue growth of over 50% and EPS growth of over 200%. How about: better than 55% below its 52 week intraday high and just over 50% below its 52 week closing high? This is not a micro cap company: it had revenue in FY1999 of $383M and currently has a market cap of just over $2 billion: but, it has NO analyst coverage. This company also has a VERY small float: just under 6 million shares.
This company earned $2.21 per share in FY1999 and is likely to exceed $5.00 EPS in FY2000 and $8.00, conservatively, in FY2001. It current stock price is around $71 a share. Let's see: that is a current TTM PE of around 32. If they report at least $1.03 in the next couple weeks, which is conservative at 25% sequentially above Q4 1999, the PE on Q1's annualized EPS is around 17. If it earns $5.00 this FY, it is currently trading at around 14 times FY2000 EPS and around 9 times FY2001 EPS. Price to Cash Flow is 1/3 less.
If this does not spell value -- based on traditional valuation methods -- with a capital V, nothing does.
Have I mentioned that this company has NO LT debt and has a (TTM) Gross Margin of over 41%, an Operating Margin of over 24%, and a net Profit Margin 17.31%, all of which have been increasing sequentially. This company will also be doubling capacity this fiscal year.
One final tidbit: its largest non-insider shareholder is Fidelity.
The company is Siliconix (NASDAQ:NM -- SILI). Briefly, it "develops, produces and markets power and analog semiconductor components for the computer, data storage, communications, and automotive markets." In particular, its bread-and-butter is Power MOSFETS, which are used in EVERY cell phone (and other wireless devices) in the world. SILI is 80.4% owned by VSH, which accounts for the small float and lack of analyst coverage.
MOT is a major customer of SILI. The only major cell phone maker in the world that is not a SILI customer is NOK, but NOK is a major customer of VSH -- thus, there is speculation that NOK may soon become a SILI customer.
Do I own it? Sure (and at a price well below its current price). Would I love to see it get more attention? Sure. But, at least as much, it still amazes me that in this day and time of a search for value (or at least a time when the market has "corrected" because too many companies are perceived as and are overvalued), there is not more coverage of and attention to companies such as SILI that represent incredible "value." Cynically, I speculate that since analysts don't cover it, no one else will either.
Maybe there will come a time soon when the talk about wanting "value" in stock prices is more than just talk. We can only hope.
Troy
PS - this was not initially intended as a spam of SILI, although I recognize that it turned into it a bit. |
