This post shares some of my due diligence, done today. I don't own KEM yet.I searched Google and used Yahoo Finance and Value Line.Also did an NAIC Stock Selection Guide Analysiswhich shows that the buy range is 26-65 ! (Use whatever low price you want,it really does not make much difference if KEM is going to make 6$ a share in 2005 as projectedand the high annual PE stays at 24.)Story in trade magazine giving good background about current situation, recent history, and competitors.<http://www.ebnews.com/story/OEG20000131S0043>An article on MSN about the 3 capacitor stocks.<http://moneycentral.msn.com/articles/invest/company/5388.asp>I started out looking it as a value play (oversold, undervalued) but I also did a mini-rule maker analysis. Now I think the company is good and growth should continue.1. Gross margins 31% !> 50%2. Net margins 20% > 10 %3. Sales growth 67% > 20%4. EPS growth 252% > 25% (or use 18% demand growth or 30% tantalum demand growth)5. Cash/debt 2 !> 36. Flowie 1.32 !< 1.25 (recently, worse earlier)7. Positive cash flow ops Yes8. Strong historical perf 20% APR price growth over last 5 years.You can see it misses on 3 counts. But not by much. It won't take long to pay off their debt. I am not convinced that a commodity manufacturer can do better on the flowie.If you read their annual report, you will be convinced they are making the rules. They seem to be making the right kind of capacitor, with the right capacity (manufacturing that is), at the right time.Also leading PEG = 27/3/ 20% sales growth < .5Also note that their operating and net margins are improving. But they have never been bad except when during the Asian crisis.One worry is that insiders (Citigroup and others?) still own 29% and seem to be gradually letting themselves out. I think this can be rationalized as 'the way the venture capital system works.'
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