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Strategies & Market Trends : Value Investing
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To: Suma who wrote (21640)7/9/2005 3:03:24 PM
From: bruwin  Read Replies (1) of 78774
 
I'd agree that ABS has quite a good dividend yield, currently, at about 3.6%. Better than most US banks !
With a P/E of 15.3 it's also, in my opinion, undervalued. I calculate its fair value P/E to be in the low 20's.
However, being in the grocery stores/retail business, its Operating Margin is a fairly low 5.8%. Not much room for manoeuvre should Cost of Sales or Running Expenses rise dramatically. Also ABS is only currently earning about 6% with its available Capital. Would be nice if this was three times bigger. I see the stock's been moving sideways for the last 2 1/2 years.
Personally, the biggest negative is its Long Term debt. This debt is larger than the company's Total Equity, and is costing ABS the equivalent of over 70% of it's Bottom Line, after tax !
$320 million would contribute a lot more to shareholder's dividends, instead of going to the banks.
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