Wow! Doing due diligence with SFE doesn't take much time. That's mostly because to do real due diligence would be to exercise DD on all of the privately and publicly held partners. If I thought I could understand all the industries and sub-industries the partners are in, I might think about doing it. Fortunately, I don't have a prayer of a chance of understanding them so I won't bother taking the time to try. :)
Having said that and having looked at CMGI's and SFE's web sites, I have to ask again: are there any compelling, significant differences between the two companies, fundamentally speaking? (I ask because I couldn't find any.)
The biggest single difference I saw is that SFE has a lot of debt. SFE's debt is 81% of shareholder equity, but how do you measure equity since so much of it is based on the value of privately held companies? Regardless, the issue of how to measure equity is moot for CMGI's tiny 1% debt.
As far as valuation is concerned, the PSRs for SFE and CMGI are 1.2 and 85, respectively. Similarly, the price-to-book ratios are 8 and 16, respectively. As Teflon has mentioned often, SFE's relative market cap is much, much smaller than CMGI's.
Notice that I didn't make any observations about the two companies' PEs or earnings. That's because I don't think earnings or revenue offer up the same ramifications for an SFE or a CMGI as they do for other companies due to the nature of their core business. I'd appreciate someone elaborating about that if I'm wrong.
I also noticed that Emerald Research has SFE and CompuCom (a majority-owned subsidiary of SFE) on their top-ten list for 1999. SFE's stock has now far surpassed Emerald's target price at the time the report was written.
Okay, Teflon. Have I done enough DD? :) What have I missed?
--Mike Buckley |
