Good evening traders and investors,
Happy Thanksgiving to our closest trading partner: the United States. I hope you are enjoying the turkey and close time with family.
It has been a tough 10 days on stock prices but that's alright because the cheaper the better. And plus, lower lows means the risk reward favors us - the buyer.
I did a lot of digging today since the U.S. markets are closed to look for great investment opportunities. The following is not one of them yet Billionaire David Einhorn bought a 2 percent stake in the company, all during the second quarter.
Compuware CPWR is currently rated a Strong Buy by seven analysts covering the firm. The shares currently trade at $7.64 after losing -3.54% yesterday and now its price to earnings ratio sits at 16.2 vs. the Software Industry's 22.6. Its 52 week trading range is $6.97 to $12.25.
The firm reported second quarter 2011 revenues of $260.70 million, a significant increase from their first quarter revenues of $229.97 million. Second quarter net income was $22.68 million or $0.10 per share (non-Gaap) beating expectations by 1 cent. That's not going to get them big press but it's a modest increase from the previous quarter net income of $16.98 million.
But there are two very important points to make. One, their net income peaked in 2007 at $158 mln and has ever since been decreasing. Two, with an average yearly income of $110 million and a market cap of $1.7 billion, a 100% investment would mean you would make little money and here's why:
$1.7 billion invested would cost you 3 percent per year in lost interest income. And, inflation would erode your investment by 2 percent per year. So, every year your total investment is costing you $85 million but since you are making about $110 million per year, your net profit is about $25 million. And at $25 million per year, or about a 1.5% return, it would take about 47 years to pay back your investment using the natural law of rhythm of 2 and assuming the share price did not appreciate.
Who da BLEEP waits 47 years? What am I missing? Was I asleep in university during my finance class? Maybe I don't even know what the hell I am talking about.
Now, while there are many other factors to consider, it does give us some premise upon which we can debate whether billionaire's David Einhorn's 2 percent (4.5mln shares) investment in Compuware last quarter was premature. He has since lost 7.77%, or about $343,345, on his investment. And with projected earnings of 59 cents per share in 2012, any misstep by Compuware and the Einhorn's investment may lose much more.
I guess David Einhorn is betting on this: while the earnings growth outlook for the software industry is positive despite the current poor global economic outlook and negative consumer sentiment, Forrester Research believes the global software industry will continue to grow in 2012 despite the decrease in projected growth for the computer hardware industry.
David Einhorn, with due respect sir, if you ever read this, call me. I got some great investment opportunities such as Spirit Aerosystems SPR where you can double your money in 14 years and who has a projected EPS of $2.23 in 2012 yet sells for $18.08, 13.3x earnings.
disclosure: no positions.
Today's posts at MorningPick
Join Morningpick @Twitter @Facebook
Happy Thanksgiving to our closest trading partner: the United States. I hope you are enjoying the turkey and close time with family.
It has been a tough 10 days on stock prices but that's alright because the cheaper the better. And plus, lower lows means the risk reward favors us - the buyer.
I did a lot of digging today since the U.S. markets are closed to look for great investment opportunities. The following is not one of them yet Billionaire David Einhorn bought a 2 percent stake in the company, all during the second quarter.
The firm reported second quarter 2011 revenues of $260.70 million, a significant increase from their first quarter revenues of $229.97 million. Second quarter net income was $22.68 million or $0.10 per share (non-Gaap) beating expectations by 1 cent. That's not going to get them big press but it's a modest increase from the previous quarter net income of $16.98 million.
But there are two very important points to make. One, their net income peaked in 2007 at $158 mln and has ever since been decreasing. Two, with an average yearly income of $110 million and a market cap of $1.7 billion, a 100% investment would mean you would make little money and here's why:
$1.7 billion invested would cost you 3 percent per year in lost interest income. And, inflation would erode your investment by 2 percent per year. So, every year your total investment is costing you $85 million but since you are making about $110 million per year, your net profit is about $25 million. And at $25 million per year, or about a 1.5% return, it would take about 47 years to pay back your investment using the natural law of rhythm of 2 and assuming the share price did not appreciate.
Who da BLEEP waits 47 years? What am I missing? Was I asleep in university during my finance class? Maybe I don't even know what the hell I am talking about.
Now, while there are many other factors to consider, it does give us some premise upon which we can debate whether billionaire's David Einhorn's 2 percent (4.5mln shares) investment in Compuware last quarter was premature. He has since lost 7.77%, or about $343,345, on his investment. And with projected earnings of 59 cents per share in 2012, any misstep by Compuware and the Einhorn's investment may lose much more.
I guess David Einhorn is betting on this: while the earnings growth outlook for the software industry is positive despite the current poor global economic outlook and negative consumer sentiment, Forrester Research believes the global software industry will continue to grow in 2012 despite the decrease in projected growth for the computer hardware industry.
disclosure: no positions.
Today's posts at MorningPick
Join Morningpick @Twitter @Facebook
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