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Strategies & Market Trends : Can you beat 50% per month? -- Ignore unavailable to you. Want to Upgrade?

To: Smiling Bob who wrote (10650)	3/15/2007 10:51:51 AM
From: Smiling Bob	Read Replies (3) \| Respond to of 19256

RSH - way overvalued already, gets bad press in USAtoday, inflation higher and mkt and RSH up That just can't last Fantastic short today and more 25.83 bid - this WILL be it for today -- Radio Shack: Plugging into this stock could be risky Q: Is RadioShack (RSH) a good investment? A: If you need a cord for your stereo system or cellphone, RadioShack is often where you'll go. But does the consumer electronics retailer's stock belong in your portfolio? RadioShack sputtered in the middle of last year as the company's earnings suffered amid tough competition with big-box retailers like Best Buy (BBY). But the company is in the midst of a turnaround that has caught investors' interest. Shares are up 67% from their low of the past 52 weeks and Goldman Sachs upgraded the stock to a buy in late January on the prediction that cost cutting and new strategies will pay off. But will the stock pay off for you? To find out, we'll analyze it in four steps: 1. Risk vs. reward. A stock only makes sense if its expected returns are big enough relative to its risk. And to find out if the stock passes this test, we can download RadioShack's trading history back to 1982. Turns out the stock has only returned 3.5% a year on average during its lifetime, including the current dividend yield of 1.1%. That's pretty lackluster if you consider that the Standard & Poor's 500 index would have returned more than 10% a year. And get this. To get the lower return at RadioShack, you accepted greater risk. The risk, or standard deviation, of RadioShack is 44 percentage points. That's 183% higher than the risk of the S&P during the same time of 15, says IFA.com. Most investors should stop here and find another investment. 2. Discounted cash flow. This measures the value in today's dollars of all the cash to be returned over the company's lifetime. It's a complex analysis made simple with the system from NewConstructs.com. When we run RadioShack through NewConstructs, we find the current stock price is "neutral." In other words, the stock is fairly valued: Not cheap but not expensive. 3. Price-to-earnings (P-E) ratio analysis. Here we compare the stock's forecasted P-E ratio to its average over the previous five years. This gives us a good idea how richly it's being valued by investors. This analysis is made easy using BetterInvesting's Stock Selection Guide. If you believe analysts, calling for 10% a year growth over the next five years, then the Stock Selection Guide rates the stock a "buy." 4. Financial soundness. No stock is a good deal if its fundamentals are shaky. A quick way to find out how the company stands is by checking the Stock Meter at money.usatoday.com. Just put the name or ticker symbol in the Get a Quote box and you'll see the Stock Meter score. There, RadioShack scores a benign 2.4. What's the bottom line? Depends on which analysis you put the most faith in. Market timers who think they can catch the stock at just right moment might think it's a buy, since the valuation is lower than it has been in recent history. But this stock's long-term track record isn't stellar and based on history will likely give you risk but little return unless you have uncanny timing. Matt Krantz is a financial markets reporter at USATODAY. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com.