I'll take that. Everything you ever wanted to know about NH and were afraid to ask:
biz.yahoo.com
I think it reads rather well (except I think they may be too optimistic about Brazil for 1999). Book value is $12 and cash is $4.50. But note a good amount of debt, so discount the cash. The average of 7 analyst estimates is $1.36 for 1999, and $1.69 for 2000, with plenty of time since the last release for adjustment.
The company would have to do more than $1 worse per share than estimates over the next two years for maintenance of the $.55 dividend to have ANY effect on cash or book value. The company has earnings power of $3 per share in good times.
I think 75% of book, a yield of 6.45% at 8 15/16 (after giving effect
to $.41 of the $.55 dividend accrued to date), is ludicrous unless
the company is going to start losing lots of money and be at real risk of cutting the dividend. In other words, that is what the current price is starting to discount.
I would add that with parent company and majority shareholder Fiat, the company may be somewhat protected from the "going out of business"
risk that can become a factor in the pricing of some cyclical stocks during hard times. I do not believe that the stock should sell for less than about $6, even if they cut out the dividend and start losing $1 per share or so, giving me a worst case scenario of minus 3 points,
versus eventual recovery potential of 15 points or more. I will take 5 to 1 reward/risk on a big company any time I can get it, particularly with that large dividend. In fact, I believe that at this price NH is a superior investment to Treasury bonds.
If analyst estimates are hit, with a recovery commencing in 2000, the stock is a potential double in 18 months. In fact, even if analyst estimates aren't hit, IF a recovery starts in 2000, I believe the price would still exceed $15 in 18 months. |
