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Amazon.com Inc (AMZN) Extended Graph Analysis

September 2nd, 2020 Posted by Extended Analysis No Comment yet

Company Profile

Amazon logo

Amazon.com Inc (AMZN) is a powerful and influential American company engaged in retailer online shopping services based in Seattle, Washington  AMZN was founded by Jeff Bezos on July 5, 1994. It began service as an online bookstore, then became a giant company when it comes to e-commerce, media, logistics, payments, hardware and data storage. The company went public in October 1995. AMZN has three business segments, namely: North America, International and Amazon Web Services (AWS).  

Amazon.com Inc (AMZN) Extended Graph Analysis

 

1. AMZN CASH FLOW

AMZN CASH FLOW

2015 2016 2017 2018 2019 2020
Net cash flow provided by operating activitIes 11,920,000,000 16,443,000,000 18,434,000,000 30,723,000,000 38,514,000,000 51,220,000,000
Net cash used for investing activities -6,450,000,000 -9,876,000,000 -27,819,000,000 -12,369,000,000 -24,281,000,000 -35,307,000,000
Net cash provided by (used for) financing activities -3,763,000,000 -2,911,000,000 9,860,000,000 -7,686,000,000 -10,066,000,000 -714,000,000
Capital expenditure -4,589,000,000 -6,737,000,000 -11,955,000,000 -13,427,000,000 -16,861,000,000 -24,263,000,000
Free cash flow 7,331,000,000 9,706,000,000 6,479,000,000 17,296,000,000 21,653,000,000 26,957,000,000
Working Capital 2,575,000,000 1,965,000,000 2,314,000,000 6,710,000,000 8,522,000,000 8,522,000,000

Facts:

  • Cash flow provided by operating expenses was $51 billion in the trailing twelve months.
  • Net cash used for investing activities were -$35 billion in the trailing twelve months.
  • Cash provided by (used for) financing activities were -$714 million in the trailing twelve months.
  • Capital expenditures were -$24 billion in the trailing twelve months.
  • Free cash flow was $27 billion in the trailing twelve months.
  • Working capital was $8.5 billion in the trailing twelve months.

Explanation

  • Cash from operations increased year-over-year at an average rate of 35 percent and grew 330 percent in five years.
  • Cash used for investing activities was investment in property, plant and equipment, acquisitions and purchases of investments.
  • Net cash provided by (used for) financing activities was debt issued and repayments.
  • Capital expenditures were investment in property, plant and equipment.
  • Free cash flow grew 268 percent in five years.
  • Working capital increased year-over-year and it grew 231 percent in five years.

Interpretation

The management is efficient in generating cash year-over-year for its business operations. The company is financially liquid.

 

2. AMZN BALANCE SHEET

AMZN BALANCE SHEET

2015 2016 2017 2018 2019
Total cash 19,808,000,000 25,981,000,000 30,986,000,000 41,250,000,000 55,021,000,000
Current Assets 36,474,000,000 45,781,000,000 60,197,000,000 75,101,000,000 96,334,000,000
Net property, plant and equipment 21,838,000,000 29,114,000,000 48,866,000,000 61,797,000,000 97,846,000,000
Total non-current assets 28,970,000,000 37,621,000,000 71,113,000,000 87,547,000,000 128,914,000,000
Total assets 65,444,000,000 83,402,000,000 131,310,000,000 162,648,000,000 225,248,000,000
Current liabilities 33,899,000,000 43,816,000,000 57,883,000,000 68,391,000,000 87,812,000,000
Non-current liabilities 18,161,000,000 20,301,000,000 45,718,000,000 50,708,000,000 75,376,000,000
Total liabilities 52,060,000,000 64,117,000,000 103,601,000,000 119,099,000,000 163,168,000,000
Retained earnings 2,545,000,000 4,916,000,000 8,636,000,000 19,625,000,000 31,220,000,000
Stockholders equity 13,384,000,000 19,285,000,000 27,709,000,000 43,549,000,000 62,060,000,000

Facts:

  • Total cash was $55 billion in 2019.
  • Current assets were $96 billion in 2019.
  • Net property, plant and equipment was $98 billion in 2019.
  • Total non-current assets were $129 billion in 2019.
  • Total assets were $225 billion in 2019.
  • Current liabilities were $88 billion in 2019.
  • Non-current liabilities were $75 billion in 2019.
  • Total liabilities were $163 billion in 2019.
  • Retained earnings were $31 billion in 2019.
  • Stockholders equity was $62 billion in 2019.

Explanation

  • Total cash increased year-over-year and grew 178 percent in five years. 
  • Total cash represents 24 percent of total assets.
  • Current assets increased year-over-year and grew 164 percent in five years.
  • Current assets represent 43 percent of total assets.
  • Net property, plant and equipment increased year-over-year and it grew 348 percent in five years.
  • New property, plant and equipment represent 43 percent of the total assets.
  • Total non-current assets increased YOY and had a growth of 345 percent in five years. 
  • Non-current assets represent 57 percent of total assets.
  • Total assets increased year-over-year and grew 244 percent in five years.
  • Current liabilities represent 54 percent of total liabilities.
  • Non-current liabilities represent 46 percent of total liabilities.
  • Total liabilities represent 72 percent of total liabilities and stockholders equity.
  • Retained earnings represent 50 percent of the total equity.
  • Stockholders equity represents 28 percent of total liabilities and equity.

Interpretation

The company has a sound balance sheet and is liquid. Moreover, the creditors have two-thirds stake in the company and the investors have one-third stake of the company’s asset. The management is using leverage efficiently to earn profit.

 

3. AMZN INCOME AND MARKET

AMZN INCOME AND MARKET

2015 2016 2017 2018 2019 2020
Revenue 107,006,000,000 135,987,000,000 177,866,000,000 232,887,000,000 280,522,000,000 321,782,000,000
EBIT 2,233,000,000 4,186,000,000 4,106,000,000 12,421,000,000 14,541,000,000 16,869,000,000
Net Income 596,000,000 2,371,000,000 3,033,000,000 10,073,000,000 11,588,000,000 13,180,000,000
EBITDA 8,308,000,000 12,492,000,000 16,132,000,000 28,019,000,000 37,365,000,000 40,788,000,000
Market Capitalization 318,344,000,000 356,313,000,000 563,535,000,000 737,000,000,000 920,000,000,000 1,585,000,000,000
Intrinsic Value 250,672,000,000 300,000,000,000 399,000,000,000 267,000,000,000 209,000,000,000 311,000,000,000

Facts:

  • Revenue was $322 billion in the trailing twelve months.
  • EBIT was $17 billion in the trailing twelve months.
  • Net income was $13 billion in the trailing twelve months.
  • EBITDA was $41 billion in the trailing twelve months.
  • Market capitalization was $1.6 trillion.
  • Intrinsic value was $311 billion.

Explanation

  • Revenue increased year-over-year and escalated 201 percent in five years, in other words, it has a strong revenue growth..
  • Revenue increased 20 and 15 percent in 2018 to 2019 and from 2019 to the trailing twelve months, respectively.
  • EBIT increases year-over-year and has a growth rate of 655 percent in five years.
  • EBIT represents 5 percent of the revenue.
  • Net income increased year-over-year and it grew 2111 percent in five years.
  • Net income represents 4 percent of the revenue, the gross revenue represents 76 percent of the revenue.
  • EBITDA increased year-over-year and it grew 391 percent in five years 
  • Market capitalization was higher than the intrinsic value of AMZN.
  • Intrinsic value was lower by 410 percent than the market value.

Interpretation

The company has a strong financial statement and is profitable. Bottom line escalated over 2,000 percent in five years.

 

4. AMZN FINANCIAL RATIOS

AMZN FINANCIAL RATIOS

2015 2016 2017 2018 2019 2020
Asset turnover (average) 1.78 1.83 1.66 1.58 1.45 1.43
Return on assets % 0.99 3.19 2.83 6.85 5.97 5.86
Return on equity % 4.94 14.52 12.91 28.27 21.95 20.75
Return on invested capital % 3.31 8.42 7.09 14.7 11.72 10.65
Debt/Equity 1.06 0.79 1.37 0.91 1.02 1.03

Facts:

  • Asset turnover was averaging 1.43 ratio in the trailing twelve months.
  • Return on assets was 5.86 percent in the trailing twelve months.
  • Return on equity was 20.75 percent in the trailing twelve months.
  • Return on invested capital was 10.65 percent in the trailing twelve months.
  • Debt/Equity was 1.03 ratio in the trailing twelve months.

Explanation

  • Asset turnover indicates that for every dollar invested in assets, the company generates 1.43 cents  of sales.
  • Return on assets indicate that the company generates 5.86 cents of net income for every dollar invested in assets.
  • Return on equity indicates that the company generated profit of 20.7 cents per share invested in equity.
  • Return on invested capital indicates that the company generated a return of 10.65 percent on its capital base.
  • Debt/Equity ratio indicates that for every dollar in equity the company uses $1.03 in debt.

Interpretation

The financial ratios indicate that the company is efficient in generating revenue from its assets and equity, in other words, the company is productive in managing its investments in assets and equity.

 

5. AMZN KEY EXECUTIVE COMPENSATION

AMZN KEY EXECUTIVE COMPENSATION

2015 2016 2017 2018 2019
Key Executive Compensation
Salary 585,599 763,090 766,840 766,840 766,840
Bonus 0 0 0 0 0
Annual Other Income 0 0 0 0 0
Restricted Stock Award 7,623,373 94,625,873 0 55,924,179 57,573,239
Securities Options 0 0 0 0 0
LTIP Payout 0 0 0 0 0
Non-Equity Compensation 0 0 0 0 0
Other Compensation 1,610,075 1,613,625 1,635,928 1,778,545 1,861,234
Total 9,819,047 97,002,588 2,402,768 58,469,564 60,201,313
Jeffrey P. Bezos / CEO
Salary 81,840 81,840 81,840 81,840 81,840
Bonus 0 0 0 0 0
Annual Other Income 0 0 0 0 0
Restricted Stock Award 0 0 0 0 0
Securities Options 0 0 0 0 0
LTIP Payout 0 0 0 0 0
Non-Equity Compensation 0 0 0 0 0
Other Compensation 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000
Total 1,681,840 1,681,840 1,681,840 1,681,840 1,681,840
Andrew Jassy / CEO, Amazon Web
Salary 171,250 175,000 175,000 175,000 175,000
Bonus 0 0 0 0 0
Annual Other Income 0 0 0 0 0
Restricted Stock Award 0 35,431,144 0 19,466,434 0
Securities Options 0 0 0 0 0
LTIP Payout 0 0 0 0 0
Non-Equity Compensation 0 0 0 0 0
Other Compensation 3,425 3,500 19,447 91,232 173,809
Total 174,675 35,609,644 194,447 19,732,666 348,809
Jeffrey A. Wike / CEO Worldwide Consumer
Salary 172,509 175,000 175,000 175,000 175,000
Bonus 0 0 0 0 0
Annual Other Income 0 0 0 0 0
Restricted Stock Award 0 32,779,614 0 19,466,434 0
Securities Options 0 0 0 0 0
LTIP Payout 0 0 0 0 0
Non-Equity Compensation 0 0 0 0 0
Other Compensation 3,450 3,500 9,781 80,613 35,725
Total 175,959 32,958,114 184,781 19,722,047 210,725
Brian T. Olsavsky / Senior VP and CFO
Salary 160,000 160,000 160,000 160,000 160,000
Bonus 0 0 0 0 0
Annual Other Income 0 0 0 0 0
Restricted Stock Award 7,623,373 4,395,447 0 6,770,149 0
Securities Options 0 0 0 0 0
LTIP Payout 0 0 0 0 0
Non-Equity Compensation 0 0 0 0 0
Other Compensation 3,200 3,200 3,200 3,200 3,200
Total 7,786,573 4,558,647 163,200 6,933,349 163,200
Jeffrey Blackburn / Senior VP, Business Development
Salary 171,250 175,000 175,000 175,000
Bonus 0 0 0 0
Annual Other Income 0 0 0 0
Restricted Stock Award 22,019,668 0 10,221,162 57,573,239
Securities Options 0 0 0 0
LTIP Payout 0 0 0 0
Non-Equity Compensation 0 0 0 0
Other Compensation 3,425 3,500 3,500 48,500
Total 22,194,343 178,500 10,399,662 57,796,739

Facts:

  • The total key executive compensation in 2015 was $9,819,047.
  • The total key executive compensation in 2016 was $97,002,588.
  • Key executive compensation in 2017 was $2,402,768.
  • Key executive compensation in 2018 was $58,469,564.
  • Executive compensation in 2019 was $60,201,313.

Explanation

  • Total key executive compensation represents 0.52 percent of the net income in 2019.
  • The total compensation of Jeffrey P. Bezos / CEO represents 2.79 of the total compensation.
  • The total compensation of Andrew Jassy / CEO, Amazon Web represents 0.58 percent of the total compensation.
  • Total compensation of Jeffrey A. Wike / CEO Worldwide Consumer represents 1.35 percent of the total compensation.
  • Key executive compensation of Brian T. Olsavsky / Senior VP and CFO represents 0.27 percent of the total compensation.
  • Compensation of Jeffrey Blackburn / Senior VP, Business Development represents 96 percent of the total compensation.

Interpretation

Total executive compensation includes salary, restricted stock award, securities options, non-equity compensation and other compensation.

 

6. AMZN LOBBYING AND CONTRIBUTIONS

AMZN LOBBYING AND CONTRIBUTIONS

PERIOD AMOUNT
2000 $492,000
2001 $847,200
2002 $920,000
2003 $920,000
2004 $920,000
2005 $920,000
2006 $1,560,000
2007 $1,622,000
2008 $1,340,000
2009 $1,810,000
2010 $2,050,000
2011 $2,220,000
2012 $2,500,000
2013 $3,456,831
2014 $4,940,000
2015 $9,435,000
2016 $11,354,000
2017 $13,000,000
2018 $14,400,000
2019 $16,790,000
2020 $9,165,000

Facts:

Since 2000 to the current date 2020, Amazon.com Inc is incurring lobbying and contributions expenditures to politicians. The annual record is seen above.

Explanation

A note from OpenSecret.org Center for Responsive Politics, quoted below:

“NOTE: Figures on this page are calculations by the Center for Responsive Politics based on data from the Senate Office of Public Records. Data for the most recent year was downloaded on April 22, 2020 and includes spending from January 1 – March 31. Prior years include spending from January through December.”

Interpretation

Lobbying and contributions to politicians vary every cycle; it may increase or decrease in amount depending on the attention given by the federal government on the issues of the company.

 

7. AMZN FINANCIAL STRENGTH

AMZN FINANCIAL STRENGTH

DATA:

Working Capital 8,522,000,000
Total Assets 225,248,000,000
Sales 321,782,000,000
EBIT 16,869,000,000
Market value of equity 1,676,200,000,000
Book value of total liabilities 163,188,000,000
Retained earnings 31,220,000,000

 

CALCULATION Ratio Score Result
A – Working Capital / Total Assets 0.04 1.2 0.05
B – Retained Earnings / Total Assets 0.14 1.4 0.19
C – EBIT / Total Assets 0.07 3.3 0.25
D – Market Value of Equity / Book Value of Total Liabilities 10.27 0.6 6.16
E – Sales / Total Assets 1.43 1 1.43
Z-Score 8.08

 

Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Explanation:

Z-Score is a statistical measurement that compares data points from different sets of data to find correlations. This measurement by Dr. Edward Altman is a significant measure in determining the financial strength of the company because it relies on different weighted financial liquidity and profitability metrics to come up with the overall score. This measure indicates the probability of bankruptcy.

Interpretation

The Z-Score of Amazon.com Inc was calculated at 8.08 score. It indicates that the company is very far in declaring bankruptcy in near future or in other terms, the company is not close to insolvency according to Dr. Altman’s grading scale. The main factors of this statistical measurement are profitability, liquidity, leverage and efficiency. AMZN has a strong financial health.

 

OVERVIEW

Amazon.com Inc is a stable company, healthy and profitable. The market value of Amazon.com soared 25 and 72 percent in 2019 and the trailing twelve months, respectively, due to the management’s outstanding performance. Consequently, the stock price of Amazon.com was overvalued from the date of this writing and posting. 

CITATION

https://www.amazon.com/

https://www.opensecrets.org/federal-lobbying/clients/summary?cycle=2000&id=D000023883

https://www.morningstar.com/stocks/xnas/amzn/quote

Researched and written by Criselda

 

 

Buckle Inc (BKE) Graph Analysis

May 4th, 2017 Posted by Graph Analysis No Comment yet

About the Company

BuckleBuckle Inc is a retailer of casual apparel, footwear, and accessories for fashion-conscious young men and women. The company markets a wide selection of brand names and private label casual apparel. It includes denim, other casual bottoms, tops, sportswear, outerwear, accessories, and footwear. Further, they operate in 450 stores in 44 states. Founded in 1948 by David Hirschfield. The company is headquartered in Kearney, Nebraska, United States.  Furthermore, it began as Mills Clothing, a men’s clothing store.

 

 

 

 

BKE GRAPH ANALYSIS

A. BKE CASH FLOWS

BKE CF

B. BKE BALANCE SHEET

BKE BS

C. BKE FINANCIAL RATIOS

BKE FINANCIAL RATIOS

D. BKE INCOME AND MARKET

BKE INC MRKT

E. BKE KEY EXECUTIVE COMPENSATION

BKE COMPENSATION

F. BKE FINANCIAL STRENGTH

BKE STRENGTH

 

Researched and written by Criselda

Twitter: criseldarome

systemax-inc-syx

Systemax Inc (SYX) Value Falling Down?

October 18th, 2012 Posted by Investment Valuation No Comment yet

Systemax Inc. (SYX) is a leading retailer of brand name and private label products, including industrial, and material handling supplies.

Value Investing Approach for SYX   

This Pricing Model was prepared in a very simple and easy way to value a company for business valuation.  Furthermore, she added that his model adopts the investment style of Benjamin Graham, the father of Value Investing.

The essence of Graham’s Value Investing is that any investment should be worth substantially more than an investor has to pay for it. He believes in thorough analysis, which we call fundamental analysis.  He looks for companies with strong balance sheet or those with little debt, above average profit margin and ample cash flow. His Philosophy was to buy wisely when prices fall and to sell wisely when the price rises a great deal.     

My basis in valuation is the company’s five-year historical financial records, the balance sheet, income statement, and cash flow statement.

In this model, we calculate first the enterprise value as our first step in valuation.  I consider this important because this is a great measure for the total value of a firm and is often a great starting point for negotiation for a business.

The Investment in Enterprise Value 

Enterprise  Value (EV) is the present value of the entire company.  EV takes into account the balance sheet, so it is a much more accurate measure of a company’s true market value than market capitalization.  It measures the value of the productive assets that produced its product or services, both equity capital (market capitalization) and debt capital. Market capitalization is the total value of the company’s equity shares.

EV is a capital structure neutral metric.  This makes enterprise value extremely useful in analyzing and comparing companies with different capital structure.  In essence, it is a company’s theoretical takeover price, because the buyer would have to buy all of the stock and pay off existing debt while pocketing any remaining cash.

Enterprise Value Table

 

The market value of Systemax, Inc. fell down at a rate of -5 percent average, alongside the enterprise value at a rate of -2 percent average.  Total debt represented 2 percent of the enterprise value while, cash and cash equivalent represented 24 percent of the enterprise value, thus enterprise value was lower by 22 percent than the market value.

The market capitalization to date, October 10, 2012, was $449 at $12.13 per share. Buying the entire business to date will cost $297.3 at $8 per share, this is the buying price, and it represents 100 percent equity.

Benjamin Graham’s Stock Test 

Net Current Asset Value (NCAV) Approach

Graham developed and tested the net current asset value (NCAV) approach between 1930 and 1932. According to his report,  the average return, over a 30-year period, on diversified portfolios of net current asset stocks was about 20 percent. An outside study showed that from 1970 to 1983, an investor could have earned an average return of 29.4 percent by purchasing stocks that fulfilled Graham’s requirement and holding them for one year.

Net Current Asset Value (NCAV) Method

I dig up some research and studies have all shown that the net current asset value (NCAV) method of selecting stocks has outperformed the market significantly.

Graham was looking for firms trading so cheap that there was little danger of falling further, which I find realistic and practical.  His strategy was indeed risky at first but it calls for selling when a firm’s share price trades up to its net current asset value.

The reason for this according to Graham is when a stock is trading below the net current asset value per share, they are essentially trading below the company’s liquidation value and therefore, the stocks are trading in the bargain, and it is worth buying.

The concept

The concept of this method is to identify stocks trading at a discount to the company’s net current asset value per share, specifically two-thirds or 66 percent of net current asset value.

 

The result for the net current asset value method for SYX was that the price was trading at an overvalued price from 2007 to 2012 because the enterprise value was greater than 66 percent of NCAVPS. This means that the stocks did not pass the stock test of Benjamin Graham. The two-thirds was 43 percent of the enterprise value, therefore the price was overvalued.

Market Value/Net Current Asset Value (MV/NCAV) Valuation

Another stock test by Graham is by using market capitalization and dividing it to net current asset value (NCAV).  If the result does not exceed the ratio of 1.2, then the stock passes the test for buying. So, let us see if the stock of SYX passes the stock test.

 systemax inc

Using the market value/net current asset value valuation, it indicates that the stock of Systemax Inc. was trading at an overvalued price from 2007 to 2011 because the ratio exceeded 1.2.

The MV/NCAV valuation tells us that the stocks of SYX did not pass the stock test of Benjamin Graham in 2007 to 2011, however, in ttm8, the stock passed the test.

Benjamin Graham’s Margin of Safety (MOS)

You should be aware that Margin of Safety requires knowing when the buying price of the stocks is low in absolute terms, rather than merely relative to the market as a whole. This formula is used to identify the difference between company value and price.

Value investing is based on the assumption that two values are attached to all companies, the market price and the company’s business value or true value. Graham called it the “intrinsic value” at the same time, buying with the difference between the two values is called the margin of safety. Value buying with a sufficient margin of safety is needed for a stock to be considered a true value investor.

Buying stock at minimum 40-50 percent

Graham considers buying when the market price is considerably lower than the intrinsic or real value, a minimum of 40 to 50 percent below. I used enterprise value because it takes into account the balance sheet so it is a much more accurate measure of the company’s true market value than market capitalization.  Let us find out and walk through the margin of safety table below for Systemax Inc.

 

After looking into the table above, I came to the realization that the intrinsic value of SYX was greater than the enterprise value, therefore, there was the margin of safety from 2007 to ttm6 2012 at an average of 73 percent. The highest margin of safety was in 2008 at 90 percent, while its lowest was in ttm6 at 57 percent. As far as I can remember, Benjamin Graham would consider buying if the price was lower the intrinsic value by 40-50 percent.   The intrinsic value of SYX was erratic in movement but generally, it was deteriorating.  The intrinsic value is the true value of the stock of SYX.

Intrinsic Value

Intrinsic Value =  Current Earnings x (9 + 2 x Sustainable  Growth Rate) 

 The explanation for the calculation of intrinsic value was as follows:

EPS: the company’s last 12-month earnings per share,  G: the company’s long term (five years) sustainable growth estimate,  9: the constant represents the appropriate price to earnings ratio for a no-growth company as proposed by Benjamin Graham (Graham proposed 8.5, instead, we used 9),  2: the average yield of high-grade corporate bonds.

 

The intrinsic value was dropping at a rate of -22 percent from $103 down to $18.38.  The sustainable growth rate was 26 percent average, while the annual growth rate for SYX was represented at a 70 percent average of the intrinsic value.

Sustainable Growth Rate (SGR)

 systemax inc

The sustainable growth rate was generally decreasing.  There was no payout ratio because SYX was not paying dividends to its shareholders. Thus, the return on equity was the same as the sustainable growth rate.

 systemax inc

The true value of the stocks deteriorates from $103 to $18 in its 5 years of operation. However, the enterprise value deteriorates at 50 percent. The space between the EV line and IV line represents the margin of safety.  The intrinsic value was higher than the enterprise value, meaning there was a margin of safety. The margin of safety for SYX was 73 percent average.

Relative and Average Approaches

The methods used in calculating the growth of SYX is by using the relative and the average return on equity.  The table below will show us the result of the two approaches.

 

Using the average approach produces a higher result of growth, intrinsic value and margin of safety. Using the average, we consider the previous performance of the company.

SYX Relative Valuation Methods 

The relative valuation methods for valuing a stock are comparing market values of the stock with the fundamentals (earnings, book value, growth multiples, cash flow, and other metrics) of the stock.

Price to Earnings/Earning Per Share (P/E*EPS)

This valuation will determine whether the stocks are undervalued or overvalued. By multiplying the Price to Earnings (P/E) ratio with the company’s relative Earning per Share (EPS). Then comparing it to the enterprise value per share, we can determine the status of the stock price.

 Systemax Inc.

The P/E*EPS the stocks of SYX were trading undervalued because the enterprise value was lesser than the P/E*EPS ratio. The P/E*EPS was represented at 129 percent over enterprise value, in other words, the price was cheap. 

 

The average price to earnings ratio produces a higher P/E*EPS, meaning, the price was undervalued.

Enterprise value (EV)/Earning Per Share (EPS) or (EV/EPS)

The use of this ratio is to separate price and earnings in the enterprise value.

 

The price (P/E) was 76 percent, while the earnings (EPS) was 24 percent average.

Enterprise Value (EV)/ Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) or (EV/EBITDA)

This metric is used in estimating business valuation. This metric is useful for analyzing and comparing profitability between companies and industries.

 systemax inc

EV/EBITDA valuation means that you will have to wait five years to cover the cost of buying. It is a long period of waiting since it will take 5 times the earnings to cover the purchase price.

Conclusion

Total debt was 2 percent average, while cash and cash equivalent was 24 percent average. Buying the entire business to date, October 10, 2012, the costs will be $297 at $8 per share. The market capitalization to date was $449 at $12.13 per share.

Using the net current asset value approach, stocks were trading overvalued. Because 66 percent of NVAV was lesser than the enterprise value. In other words, the price was above the liquidation value of SYX.  In addition, the price was overvalued because the result was more than a 1.2 ratio. Therefore, the NCAV approach did not pass the Benjamin Graham’s stock test.

Margin of safety

On the other hand, the margin of safety was 73 percent using relative ROE; 76 percent using the average ROE. The sustainable growth rate was 26 percent.

The price was undervalued in the P/E*EPS, while in EV/EPS price (P/E) was 76 percent. In addition, the earnings (EPS) was 24 percent.  The price was overvalued.

Moreover, the EV/EBITDA tells us that it will take 5 years of the earnings to cover the costs of buying.

Overview, although there was a margin of safety, the stock of SYX was trading at an overvalued price. Therefore, I recommend that the stock of Systemax Inc be HOLD.

Written by Cris

Note:

Research Reports can be found under the company tab.