Here is my pick for the morning bull: SLM Corporation (US:SLM)
What Does This Company Do?
Sallie Mae is the largest student lender in the country. It makes and holds student loans through the guaranteed Federal Family Education Loan Program as well as through private channels. It also engages in debt-management operations, including accounts receivable and collections services, and runs college savings programs. Created as a government-sponsored enterprise in 1972, Sallie Mae cut the last of its official ties with the government in 2004.
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Financial Highlights (data provided by CNBC, Morningstar, and SEC)
Price. SLM has given back almost every gain it made this year. Currently, its trading +2.03%, -6.89%, and -7.42% against its 20-day, 50-day, and 200-day moving average. Technical analysis indicates a head and shoulders pattern. The head and shoulders pattern is generally regarded as a reversal pattern and it is most often seen in uptrends. Volume yesterday was 8.6M, well above its 5.1M average. Look for resistance at $14.24 and support at $16.31.
Revenue. Sales during the past 3 fiscal years were $1,784B, $3,109B, $4,502B and twelve month trailing is $3,584B. While sales decreased 3.2% in the last quarter ending June 30, 2011, to $868 compared to last year, the firm surprised analysts polled by FactSet Research, who predicted SLM would produce $831.8M. While the firm is no longer positioned as the largest provider of federally guaranteed student loans, legacy loans under the defunct FFELP program will provide the company with a stable and secure revenue stream. Additionally, loan originations for Q2 2011 were $264 million, up 21 percent from $219 million. The portfolio totaled $35.8 billion at June 30, 2011, compared to $35.2 billion one year earlier. Price-to-sales ratio is currently at 1.09 compared to the Consumer Finance average of 0.75. With the defunct FFELP program, Sallie Mae faces competition from DFS Financial, for example, who may give consumers better credit terms.
Net Income. The firm loss $6 million last quarter, or 2 cents per share, from a year-ago profit of $338 million, or 63 cents a shares. However, the loss was compounded by a pre-tax $414 million unrealized, mark-to-market loss on derivatives. Competition may put pressure on Sallie Mae's profits.
Earnings per share. The firm earned 48 cents per share in Q2 2011 compared to Q1 2010. Analysts were expecting 42 cents per share. Overall, the firm continues to surprise analysts quarter after quarter since Q1 2010. That's 6 straight quarters. The firm's share price has appreciated about 20% since. It P/E ratio (ttm) is currently 6.6 compared to 16.4 for the Consumer Finance Industry and 13.7 for the Financial Sector. This metric is unreasonably low and should correct to a more rational 12.2, discounting earnings at 8.2 percent.
Liquid Assets. Cash and cash equivalents are around $4.3B while its long term debt is $160B. This severe disparity will exert tremendous influence on the stock's valuation from a go-forward basis. Moreover, its equity-to-asset ratio is only 2.6 percent.
Free Cash. Twelve month trailing at $3.2B compared to -$6.962B for 2010.
Yield. On July 29, 2011, the firm announced a 2011 third-quarter dividend on its common stock of $0.10 per share. The dividend will be paid on Sept. 16, 2011, to shareholders of record at the close of business on Sept. 2, 2011. In addition, the company announced a 2011 third-quarter dividend on its Preferred Stock Series B of $0.4971194 per share. The dividend on the Preferred Stock Series B will be paid on Sept. 15, 2011, to shareholders of record at the close of business on Sept. 5, 2011. On June 30, 2011, Sallie Mae had 529 million shares of common stock, 3.3 million shares of Preferred Stock Series A, and 4 million shares of Preferred Stock Series B outstanding. The stocks trade on the New York Stock Exchange.
Insider Trading. No material insider buying or selling to report, according to SEC form 4. View here.
Additional Commentary. Sallie Mae continues to surprise analysts quarter after quarter. To quote the CEO, Albert Lord, about the firm's last quarter in June 2011, “We today report solid second quarter performance. I am particularly pleased we continue to reduce credit costs and operating expenses as expected. I am also encouraged by private credit growth in a subdued economy.” There are two opposing forces that will play a role in the shares' price: continued earnings' surprises and the firm's heavily leverage balanced sheet. If the firm keeps surprising analysts in their earnings release then the stock should appreciate.
Keep slaying the dragon.
disclosure: None and not expected to change within 72 hours.
What Does This Company Do?
Sallie Mae is the largest student lender in the country. It makes and holds student loans through the guaranteed Federal Family Education Loan Program as well as through private channels. It also engages in debt-management operations, including accounts receivable and collections services, and runs college savings programs. Created as a government-sponsored enterprise in 1972, Sallie Mae cut the last of its official ties with the government in 2004.
Visit Company Website
Financial Highlights (data provided by CNBC, Morningstar, and SEC)
Price. SLM has given back almost every gain it made this year. Currently, its trading +2.03%, -6.89%, and -7.42% against its 20-day, 50-day, and 200-day moving average. Technical analysis indicates a head and shoulders pattern. The head and shoulders pattern is generally regarded as a reversal pattern and it is most often seen in uptrends. Volume yesterday was 8.6M, well above its 5.1M average. Look for resistance at $14.24 and support at $16.31.
Revenue. Sales during the past 3 fiscal years were $1,784B, $3,109B, $4,502B and twelve month trailing is $3,584B. While sales decreased 3.2% in the last quarter ending June 30, 2011, to $868 compared to last year, the firm surprised analysts polled by FactSet Research, who predicted SLM would produce $831.8M. While the firm is no longer positioned as the largest provider of federally guaranteed student loans, legacy loans under the defunct FFELP program will provide the company with a stable and secure revenue stream. Additionally, loan originations for Q2 2011 were $264 million, up 21 percent from $219 million. The portfolio totaled $35.8 billion at June 30, 2011, compared to $35.2 billion one year earlier. Price-to-sales ratio is currently at 1.09 compared to the Consumer Finance average of 0.75. With the defunct FFELP program, Sallie Mae faces competition from DFS Financial, for example, who may give consumers better credit terms.
Net Income. The firm loss $6 million last quarter, or 2 cents per share, from a year-ago profit of $338 million, or 63 cents a shares. However, the loss was compounded by a pre-tax $414 million unrealized, mark-to-market loss on derivatives. Competition may put pressure on Sallie Mae's profits.
Earnings per share. The firm earned 48 cents per share in Q2 2011 compared to Q1 2010. Analysts were expecting 42 cents per share. Overall, the firm continues to surprise analysts quarter after quarter since Q1 2010. That's 6 straight quarters. The firm's share price has appreciated about 20% since. It P/E ratio (ttm) is currently 6.6 compared to 16.4 for the Consumer Finance Industry and 13.7 for the Financial Sector. This metric is unreasonably low and should correct to a more rational 12.2, discounting earnings at 8.2 percent.
Liquid Assets. Cash and cash equivalents are around $4.3B while its long term debt is $160B. This severe disparity will exert tremendous influence on the stock's valuation from a go-forward basis. Moreover, its equity-to-asset ratio is only 2.6 percent.
Free Cash. Twelve month trailing at $3.2B compared to -$6.962B for 2010.
Yield. On July 29, 2011, the firm announced a 2011 third-quarter dividend on its common stock of $0.10 per share. The dividend will be paid on Sept. 16, 2011, to shareholders of record at the close of business on Sept. 2, 2011. In addition, the company announced a 2011 third-quarter dividend on its Preferred Stock Series B of $0.4971194 per share. The dividend on the Preferred Stock Series B will be paid on Sept. 15, 2011, to shareholders of record at the close of business on Sept. 5, 2011. On June 30, 2011, Sallie Mae had 529 million shares of common stock, 3.3 million shares of Preferred Stock Series A, and 4 million shares of Preferred Stock Series B outstanding. The stocks trade on the New York Stock Exchange.
Insider Trading. No material insider buying or selling to report, according to SEC form 4. View here.
Additional Commentary. Sallie Mae continues to surprise analysts quarter after quarter. To quote the CEO, Albert Lord, about the firm's last quarter in June 2011, “We today report solid second quarter performance. I am particularly pleased we continue to reduce credit costs and operating expenses as expected. I am also encouraged by private credit growth in a subdued economy.” There are two opposing forces that will play a role in the shares' price: continued earnings' surprises and the firm's heavily leverage balanced sheet. If the firm keeps surprising analysts in their earnings release then the stock should appreciate.
Keep slaying the dragon.
disclosure: None and not expected to change within 72 hours.
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