SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Value Investing
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: E_K_S who wrote (59906)4/17/2018 8:20:15 PM
From: E_K_S1 Recommendation

Recommended By
Lance Bredvold

   of 78666
 
Comtech Telecommunications Corp. (CMTL) - peeled off 20% @ $32.45/share
(FWIW, last sale represent a 3 bagger in 20 months)

Trying to determine fair value on a stock that is showing excellent earnings recovery is difficult. I was very lucky to accumulate my position in five different Buys between 7/2016-10/2016 at prices between $11.400/share and $13.50/share. EPS fell off the cliff after company made a large acquisition, CEO cut dividend by 60% and the stock fell from $40/share to $9.52/share.

BV was always good around $20.00/share w/ not too many intangible assets and much of their business was secured through steady government contracts. GAAP EPS in 2015 was $1.42/share and fell to -$0.46/share in 2016 and for 2017 they reported $0.67 for 2017. 2018 NON-GAAP EPS is estimated to be $1.14/share (I prefer GAAP so on Barchart.com it is $0.55/share for 2018).

NOTE: This violated the basic GN rule to discard candidate stocks that post negative EPS! Therefore I used the modify EKS rule citing this is a special situation and a few one time charges (ie clean up quater by CEO)

Bottom line; GN shows stock is +58% overvalued (fair value is $20.17/share). 2018 Non-GAAP PE is 28 and GAAP is 59 !

On every metric, CMTL seems overvalued. EPS growth is +250%. However, if you look at reversion to the mean EPS $1.45/share-$1.55/share, PE is 20 and EPS growing more than 20%.

As a result I still hold 40% of my original shares and will be scaling out of the investment as I find other under valued plays. I think Grahmn would just exit the entire position if/when he felt it was selling at fair value. You would have left over 58% on the table!

Conclusion:

I find that the GN methodology allows for a good gauge on entering a position using EPS, BV and adjusting for tangible and non-tangible assets and other special factors (like new CEO). Howver it pays to evaluate your exit strategy sell in small lots especially if EPS continue to rise and EPS growth is higher than the estimated forward PE. Remember the reversion to the mean EPS guideline too.

Also, I find that small caps will over shoot more often than large caps.

It's still nice to book a 3 bagger in 22 months considering many of the false starts I have had w/ several of my other GN value Buys. Then maybe it is just luck too.
--------------------------------------
I increased my BGS position recently w/ Buys at $24.15/share and havd D on my value list. Looking to peel off some PSX (acquired in 5/2012 @ $20/share via COP spin off today $108.00/share . . 6 years +540%)

Good Investing

EKS
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News