Here is an interesting stock site:
Tools - An excellent resource for investing!
- $6.99) IO has been long on promise and short on delivery for a decade.
That said; it is currently at the right place, at the right time, and its
stock trades at the right price. Input/Output is a leading manufacturer of
seismic equipment and services. 2004 revenues are projected at $265m, gross
profit margins are at 30%, debt to EBITDA is at approximately 2.31 times,
and EPS between 14 cents and 20 cents. 2005 EPS street estimates are in the
50 to 60 cents range. Trading at 12 times next years earnings, IO is a
company that if its markets stay strong and if it can execute correctly; it
has the potential to trade at a multiple of its current price.
Imperial Chemical Industries ("ICI")
ICI is an excellent way
to diversify one’s portfolio and would be a solid second tier stock in most
portfolios. Over the past nine years the company re-shuffled its
mix-of-companies out of low-margin commodity chemicals and into
higher-margin specialty products, such as; food starches, adhesives,
flavors, fragrances, specialty chemicals and paints. Street estimates are
projecting 2004 revenues at $10.7B and ADR – EPS at $1.41.
Leverage is moderate,
with an EBITDA to Net Debt Ratio of approximately 1.84 times at 6/30/04.
ICI is global
organization with operations all over the world. Management is emphasizing
growing its presence in China and India. Regardless, the company is already
strong in the Asia Pacific region, which accounts for 23% of its revenues.
The company’s National
Starch subsidiary is also well positioned in the low carbohydrate diet trend
with its line of “Hi-Maize” resistant starches.
ICI is also continuing
to streamline its cost structure by laying-off 2,100 employees, projecting
saving of $100m per year by 2005. However, margin improvements will be
difficult to achieve with oil prices in the $40 to $50 per barrel range.
The company seems to
have over come its computer implementation problems at its Quest subsidiary
which took a toll on the company’s stock price last year.
ICI recently sold its
food ingredients business of Quest for net proceeds estimated at $365m, the
company has reduced its long-term debt from $4.9b to approximately $2.2B
over the past seven years.
Yahoo has recently
increased its one year target price of $11 per share to $15.88. Barring any
unforeseen events I think Yahoo’s price target is conservative. The old
shareholder already absorbed the losses; new shareholders may do quite well.
This is a global $10b organization that is conservatively managed and
reasonably priced. At 11 times 2004 projected earnings, ICI is an
Service Corporation International ("SCI")
Date: 3/10/04 - Updated 2/15/05 & 4/19/05
Service Corp International is a North America funeral parlor and cemetery
operator. At 9/30/04 the company operated 1,236 funeral parlors and
406 cemeteries with 20,000 employees. The
company has been streamlining its operations for the past 5 years by selling
off its foreign assets and reducing its debt. It’s now primarily a North
America company and is projecting revenues of approximately $1.9 billion for
FYE 2004 with an EPS of approximately 30 cents.
SCI's Five main attributes:
First, it has a $5.2 billion signed and collateralized backlog, that will
be realized over approximately 12 years.
Second, this company is a cash cow and generates free cash flow in excess
of $200 million annually.
Third, the company has good gross margins. As of YTD 9/30/04 the funeral
business had gross margins of 20.4% while the cemetery business had 16.2%
Fourth, during the
past four years, the company reduced its net debt by over $3 billion, which
now amounts to $977m. Representing a Net Debt to Total Capital Ratio of 34%.
Fifth, on February 10, 2005 the company initiated paying dividends of 10
cents annually. The first dividend since 1999 and a major step in regaining
favor on Wall Street.
My general feeling is that SRV has started to regain its status on
Wall Street. Their restructuring is just about over, and once normalized,
their growth should be slow, steady and profitable. Additionally, I have
always noticed that the owners of funeral parlors always seem to be doing
well and have a steady clientele; that observation should hold true for SCI.
SCI announced that they are writing-off capitalized deferred selling
costs on their B/S, and going forward they will expense these costs, in
their P&L, as incurred. EPS going forward, of course, will be reduced; cash
outflows will be expensed rather then capitalized. I personally don't think
that flip flopping numbers around the financial statement is the way to go.
What is needed is clarification by the PCAOB as to what type of expenses
should be capitalized. This effects many industries. Banks for example,
capitalize commissions and other loan origination costs, and then expenses
then over the life of the loans. It's a balance sheet versus the P&L
geography issue. Nonetheless, this seem like it has no economic or
cash flow impact and cleaning up the balance sheet is always good. These
type of changes can create buying opportunities.