Some notes on SFP from briefing.com:
[BRIEFING.COM - Patrick J. O'Hare] This company doesn't have the best-known name on Wall Street. Heck, it doesn't even have the best-known name on Main Street. It does, however, possess one of the best-known brand names in the George Foreman Grills which highlight a broad range of quality small appliances, tabletop products and personal care/time products that Salton designs, markets, and distributes. Suffice it to say, Salton (SFP 46) doesn't operate in a "hot" industry, but it has produced some hot results...
Trading Points
Before the open yesterday, Salton reported record fiscal third quarter results with net sales increasing 38% to $172.1 million; diluted earnings per share soared to a record $0.95, which was $0.12 ahead of estimates, and a 164% increase from the year-ago period.
That 38% growth was entirely organic from revenues of existing and new product introductions... Driving the sales were its core product categories which include the George Foreman line of grills, Farberware products, Melitta coffe maker products and the Rejuvenique Facial Toning System.
Gross profit margins increased to 39.4% from 34.8%; and as a percentage of net sales, SG&A expenses were only 21% versus 25% in the prior year period.
Looking to enhance sales of new and existing products, Salton finalized a strategic distribution alliance during the quarter with ePods, Inc,. to provide consumers with a fully integrated unit that will provide seamless Internet access and a personalized Web experience to consumers at branded retail chains throughout North America... The company also forged a joint marketing alliance with Kellogg USA
In February, Salton guided estimates higher for FY00, confident it could report a profit in the range of $5.60-$6.00 per diluted share... In the past 90 days, analysts have raised estimates for FY00 and FY01 by $0.21 and $0.18 respectively to $5.80 and $6.48... The latter could prove conservative if Salton's new Ultravection oven, expected to be introduced in Q3 of FY01, scores big with consumers... Of the 5 analysts covering the stock each has a STRONG BUY rating.
Shares of SFP actually traded lower after yesterday's earnings report, but mind you, this stock more than doubled in less than a month's time between Jan. 12-Feb. 9 on some relatively unbridled optimism over the company's sales prospects... The stock peaked at 60 7/8 on the latter date as it was added to the S&P 600 Small Cap Index following the close of trading on Feb. 8.
Since then, it hasn't been such an easy road for SFP which is now down 24% from that all-time high... Aside from needing to consolidate some of those gains, the stock has come under added pressure from short sellers given concerns surrounding the retailers and a slowdown in consumer spending... As for its inability to trade higher following an otherwise solid earnings report, that may have stemmed from the fact that its sales growth of 38% was the lowest year-over-year gain since its second fiscal quarter in FY99.
The deceleration in Salton's sales growth would be more troubling if SFP traded at 100x est. earnings, but the fact of the matter is that SFP trades at just 7.9x est. FY00 earnings and 7.1x est. FY01 earnings-- a notable discount to its peer group and the overall market, and yet SFP sports a 5-yr projected growth rate of 24% which is 57% higher than the projected long-term growth rate for its industry and the overall market... By the way, that translates into est. PEG rates of 0.32 and 0.30.
Might interest you to know, too, that the short interest ratio on SFP stands at 13.8 days... Given the right set of circumstances, this stock could see some rapid price appreciation in a short covering rally.
That possibility notwithstanding, Salton's solid growth prospects coupled with its discounted valuations and Wall Street's bullish backing make it an attractive investment at current levels. |
