Arnie, thanks for the analysis. Your projection seems reasonable, and not too far above analysts estimates of $1.06. Still, I must say that my growth outlook for FM has been diminished somewhat, because same store sales increases are slowing (they've been as high as +10% recently and are now down in the 4% range). So, I believe that at $18/share, FM is pretty close to fair value, and doesn't represent as compelling a bargain as it once did. I wish I could say that as a consumer stock, FM would be a good holding right now, but the recent slide from a high of $21 to $15 3/4 exhibited more volatility than many tech issues.
The real question is whether the market (remember, 70% of FM is owned by institutionals) will again value FM's future growth as highly as they did just six months ago. We know that FM recently traded far above a PE of 20.
Analysts are projecting a growth rate (earnings) of 20% for next year, while your number implies a growth rate of 33%. With your $1.18, a PE of 20 to 33 yields an upside range of $24 to $39/share. Do you believe FM will soon be trading at the bottom or middle of this implied range? Also, have you factored in FM's propensity to use earnings to pay down debt? No doubt there will be additional debt repayments that will impact earnings.
Regards,
D. Kuspa |
