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No. of Recommendations: 2
I maintain a watch list of 2616 stocks. With the exception of less then 10 stocks, all of the stocks on my watch list are domestic companies. Alas, Core Laboratories, NV (NYSE: CLB) was not one of the exceptions.

But out of curiosity, I completed a worksheet on the company, and have now added it to my watch list.

Based on the company's latest annual financial information, which is for fiscal year ending December 2007, I added the stock to my watch list with a reasonable value estimate of $110, a price that is slightly above the stocks current second resistance point, and a price that is 83% above the stock's most recent close.

Based on my reasonable value estimate, I have a Buy target of $55, a First Sell Target of $107, and a Close Target of $116.

In review of the financial information that I found for the company, and considering the metrics that are important to me based on that financial information, I have a Strength of Statement Buy target of $46.

In other words, based on the financial metrics that are important to me, I would give management a performance grade of 83, and based on that Strength of Statement score, would adjust my Buy target accordingly.

One of the metrics I like to watch is the Cash Ratio, the ratio of Cash and Marketable Securities to Current Liabilities. I like this ratio because it removes Accounts Receivable and focuses 100% on the Cash on hand. For fiscal 2007, Core Labs' was 0.26. My worksheet target is 0.65.

Another of the things I was not real happy about, was the company's Goodwill and Intangibles to Total Assets, which for fiscal 2007, stood at 29%, about 14% higher than my worksheet target. While Goodwill and Intangibles may be required from an accounting perspective, from the perspective of an investor, me, they are pretty much worthless. So anything above 15% of Total Assets raises a management flag to me.

Another of the metrics on my worksheet is the Debt to Equity ratio. Conference call discussions about Debt are fine, but for Debt amounts to have some basis, they need to be compared to something, which for the purposes of this metric is Equity.

Generally, the Debt to Equity ratio target is determined by dividing Total Liabilities by Shareholder Equity. My Debt to Equity ratio is a bit different. I add up Notes Payable, Short Term Debt, Long Term Debt, and Capital Lease Obligations and divide that total by the Shareholder Equity. What I'm interested in is how much MY piece of the company pie will be reduced when the more senior debt holder claims are satisfied.

The target on my worksheet for this metric is 0.3, and while my calculated results for Core Labs was 4.87.

There are metrics and there are TMFGrape metrics. One of the metrics that Phil Weiss left at Fooldom was the Flow Ratio. It can be a bit of a pain in the ear to understand because it removes Cash from Current Assets and divides the result by Current Liabilities with Short Term Debt removed.

The idea is to determine just how efficiently the company's capital is being managed. The target value for the metric is 1.25. The lower the number the more prudent management is being with the receiving and deploying the company's Cash. Given current economic conditions, I would think the Flow Ratio would have quite a bit of relevance.

Lastly is the PEG Ratio, a metric which I view as pretty much worthless It is the comparison of the current price to the current analysts’ earnings growth guess. I use it just as a way to very generally verify that my reasonable value estimate is not too far off.

The idea is that if the PEG ratio is below 1, then the stock is undervalued basis the analysts’ guess for growth and if it is above one, then Tinker Bell will fly into a wall at 70 MPH.

The earnings growth guess I found for Core Labs was 20.5% (good luck with that), which gave me a PEG Ratio of 0.58. If I adjust my Reasonable Value Estimate of $110 by the PEG ratio, I get a current fair value price of about $64.

As I said, if the PEG Ratio means something to you, then congratulations, I hope you’re around to watch turtles fly.

Just a few thoughts.

Wax
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