How to Analyze a Stock Using Toolkit 6
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A handout for the May 3, 2011 webinar by Doug Gerlach of ICLUBcentral, demonstrating how to analyze a stock using Toolkit 6.
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How to Analyze a Stock Using Toolkit 6
- 1. How to Analyze a Stock in Toolkit 6, by Doug Gerlach by Douglas Gerlach President, ICLUBcentral Inc. gerlach@iclub.com May 2011 } To dissect a stock using Toolkit 6 } Consider factors which affect the company as evaluated during a stock study: Growth Quality Valuation Page 1 of 10
- 2. How to Analyze a Stock in Toolkit 6, by Doug Gerlach } Growth Evaluate the components of historical growth Consider factors which may affect future growth } Quality Evaluate companys quality characteristics Consider factors which may affect future quality } Valuation & Projected Return Evaluate stocks current valuation Consider factors which may affect valuation in future and potential return } NASDAQ: SCSC } Sector: Technology } Industry: Computer Distribution } Description: Leading international distributor of specialty technology products, consisting of seven sales units in North America, Latin America and Europe. } Products: AIDC (bar code) and Point of Sale (POS) Communications (voice, data and video) Physical Security (video surveillance and access) } Distribute for over 200 technology manufacturers } Over 21,000 value-added technology resellers } Central logistics strategy for major geographic regions Page 2 of 10
- 3. How to Analyze a Stock in Toolkit 6, by Doug Gerlach } Founded in 1992 } 1,100 employees } Corporate headquarters in Greenville, SC } 19 offices in North America, Latin America & Europe } 24% of business is International } Ranks #881 on Fortune 1000 } Currently in Russell 2000 and S&P SmallCap 600 Indices } http://www.scansource.com } Does past growth of Sales & EPS warrant further consideration? } Revenues steadily increasing 10 year (01-10) Revenue growth 14.3% } EPS growing, though at lower rate 10 year (01-10) EPS growth 13.0% } 10-yr EPS R2: 0.90 Page 3 of 10
- 4. How to Analyze a Stock in Toolkit 6, by Doug Gerlach } Growth declined in 09 } Is this acceptable? Attributable to recession? 10 showed improvement, first 1 quarters of 11 showed much improvement. } Look more closely at quality of earnings, particularly trend of pre-tax profit margins & industry comparisons. Page 4 of 10
- 5. How to Analyze a Stock in Toolkit 6, by Doug Gerlach } 3rd quarter ended 3/2011 just reported on 4/27/11 too new for data service. } Press release on company web site or Yahoo! Finance News provides key data. } Sales up 23.6%. } EPS up 33.3%. } Note how price tracks EPS growth } Annual high price doesnt increase every year } Still, price growth consistent with long-term trends. Page 5 of 10
- 6. How to Analyze a Stock in Toolkit 6, by Doug Gerlach } 5-year Analysts Consensus EPS growth for SCSC: 10.% } Implied growth rate for SCSC: 14.4% } Next 2 FY EPS: $2.49 (2011) & $2.74 (2012) (Nasdaq.com) } 5-yr average PTP: 3.8% } 2010 PTP: 3.6% } 5-yr PTP trend: Even } Industry comparison Page 6 of 10
- 7. How to Analyze a Stock in Toolkit 6, by Doug Gerlach Computers Distribution Debt/ Symbol Company ROE % PTP Equity IM Ingram Micro Inc. 16.3 3.6 1.1 SCSC Scansource, Inc. 6.2 12.4 3.8 TECD Tech Data Corporation 2.8 5.0 0.8 WSTG Wayside Technology Group 0.0 14.9 3.3 StockCentral, May 2011 SCSC IM TECD SNX Industry Market Cap: 965.6M 2.9B 1.1B 2.4B 65.3M Employees: 1,074 15,650 10,000 8,700 499 Qtrly Rev Growth (yoy): 24.7% 12.2% 29.2% 13.3% 18.10% Revenue (ttm): 2.4B 34.5B 9.1B 24.3B 40.9M Gross Margin (ttm): 10.2% 5.4% 5.7% 5.2% 45.6% EBITDA (ttm): 101.4M 547.1M 231.8M 381.2M 3.2M Operating Margin (ttm): 3.9% 1.4% 2.3% 1.3% 7.6% Net Income (ttm): 63.3M 318.0M 123.0M 214.2M N/A EPS (ttm): 2.35 1.94 3.40 4.36 0.06 P/E (ttm): 15.2 9.6 9.5 11.9 16.0 PEG (5 yr expected): 1.4 0.8 0.9 1.0 1.2 P/S (ttm): 0.4 0.1 0.1 0.1 1.2 http://finance.yahoo.com/q/co?s=SCSC Page 7 of 10
- 8. How to Analyze a Stock in Toolkit 6, by Doug Gerlach } Consider historical high & low P/E Ratios Any outliers? } Review & select expected average high & low P/E Ratios Compare to projected EPS growth rate do they fit? } Dig into Business Model method of projecting EPS } Consider worsening profit margin scenario } What factors affect future profitability? } Compare results to projection to ensure reasonable expectations Page 8 of 10
- 9. How to Analyze a Stock in Toolkit 6, by Doug Gerlach } Select high & low 5-year prices } Evaluate zoning } Review Relative Value } Review projected total return } Its time to reach your own conclusion! } How would this stock fit in your portfolio? } Are returns acceptable? } Is risk level acceptable? Page 9 of 10
- 10. How to Analyze a Stock in Toolkit 6, by Doug Gerlach } ScanSource web site (http://www.scansource.com) Annual Report Press Releases } Quarterly & Annual SEC Reports } StockCentral (http://www.stockcentral.com) } Nasdaq.com (http://www.nasdaq.com) } MSN Investor (http://investor.msn.com) } Yahoo! Finance (http://finance.yahoo.com) } ICLUBcentral Inc. www.iclub.com } Write me: gerlach@iclub.com Page 10 of 10