Member Articles

Apple Priced for Significantly Slower Growth

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/275395-apple-priced-for-significantly-slower-growth At Valuentum, we often use a discounted cash-flow model as a means to back into the current share price of firms in order to ascertain whether the market is unfairly pricing their stock relative to reasonable long-term growth and profitability assumptions. In Apple’s case, it appears that the market is certainly concerned about future growth rates, almost to the tune of merely expecting inflation-like expansion beginning toward the middle of this decade. Although in the land of technology, competition adapts quickly and a few years from now can be viewed as the distant future, Apple represents a compelling risk-reward opportunity at these levels based on our analysis. Often, evaluating a … Read more

Ageing Fleets: Which Airline Has the Highest Costs?

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273990-aging-fleets-which-airline-has-the-highest-costs  With jet fuel once again on the rise and the economic environment becoming even more uncertain, it’s informative for airline stock speculators to know which carriers have the oldest fleets. The age (and model) of an aircraft could have large implications on fuel efficiency and ultimately the airline’s cost structure, which becomes absolutely paramount under poor economic conditions. Let’s evaluate the fleets of the Big Four legacy carriers in the U.S. US Airways (LCC) As of the end of last year, US Airways was flying nearly 60 Boeing 737 Classics and 10 legacy 767s that were on average about 21 years old. These Classics and legacy 767s are roughly 15%-20% … Read more

9 Aerospace Suppliers With Attractive PEG Ratios

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273893-9-aerospace-suppliers-with-attractive-peg-ratios Although there is no substitute for assessing a firm’s valuation on a discounted cash-flow basis, evaluating a firm’s value through its PEG ratio may be the next-best option. Provided in this article is an aerospace supplier cheat sheet that gives a brief description, the market cap, consensus forecasts, long-term growth estimates, and the corresponding PEG ratios for suppliers within the commercial aerospace chain. This list should come in handy as commercial aircraft deliveries soar in coming years. (Click charts to expand) Based on the cheat sheet below, there are nine aerospace suppliers that currently garner a PEG ratio below 1, derived by taking the price-to-earnings ratio based on next year’s … Read more

Boeing Faces Challenges in the Narrowbody Market

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273827-boeing-facing-challenges-in-narrowbody-market   Aerospace executives know all too well of the difficulties and complexity of developing brand new planes. Investors have learned that aerospace management is often too optimistic in setting entry-into-service dates. Readers have to look no further than the troubles and serial delays of Boeing’s 787 Dreamliner and Airbus’ A380 to get the gist of what I’m talking about. But have airline customers wised up, too? And, if so, will the perception of pursuing a brand new build to replace its 737 in 2019-2020 actually hurt Boeing and ultimately provide an advantage to Airbus’ A320neo in the 150 to 200 seat category? To the first question: absolutely. Bloomberg reported on Southwest’s (LUV) … Read more

Sorting Through the Aerospace Supply Chain

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273424-sorting-through-the-aerospace-supply-chain  As outlined in the previous two editions, The Future of the Narrowbody Market and How to Play the Upswing in Commercial Aerospace, expected deliveries of commercial planes are set to advance considerably in coming years. In this third edition, let’s dig into the valuation and potential upside of Precision Castparts (PCP), one of the best long-term plays on commercial aerospace demand. We’ll also dive into an interesting small-cap play and a compelling micro-cap opportunity in the aerospace supply chain. For new readers to this series of articles and analysis, let’s briefly review the trajectory of large commercial aircraft deliveries during the next several years. Aside from the fundamental drivers (replacement planes, … Read more

Troubles Loom for Aviation Stocks

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273564-troubles-loom-for-aviation-stocks As many followers of airline equities know, rising jet fuel prices and concerns about the global economy can translate into some fairly poor performance for airline shares. Today, perhaps unsurprisingly, the International Air Transport Association (IATA) cut its profit forecast for the airline industry by more than half to just $4 billion in 2011, (down from the $8.6 billion it had estimated in March). For perspective, the industry earned $18 billion last year. This equates to roughly a 0.7% net margin and raises the probability of yet another year of airline losses. The major causes of this revision are well-known and have been in the headlines for weeks — natural … Read more

Despite High Short Interest, Ancestry.com Is Ripe for Impressive Growth

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/272898-despite-high-short-interest-ancestry-com-is-ripe-for-impressive-growth  After listening to Ancestry.com’s (ACOM) presentation and question-and-answer session at the Bank of America Merrill Lynch Technology conference Wednesday, we are reiterating my $70 fair value estimate on the firm’s shares. The call also reminded us of one of Peter Lynch’s investing principles. During most of the questions, it became readily apparent that the basic assumption is that Wall Street (defined by the moderator as those that attended the conference, or have posed questions to this particular sell-side analyst in the past) doesn’t necessarily mesh well with Ancestry.com’s demographic market and users. To some extent (not all), this may be why the firm is one of the most heavily shorted stocks on the … Read more

Assessing Dividend Plays in the Trash Industry

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/272847-assessing-dividend-plays-in-the-trash-industry  Companies in the municipal solid waste sector are well-known for their cash-flow generating prowess and relatively stable operating performance. As outlined in this waste industry primer, a trash-taker’s residential collection operations are on a service-based model (not-volume based) and help to mitigate cyclical pressures in other economically-sensitive lines of their business (industrial roll-offs, etc.). Further, cell-by-cell landfill development provides additional flexibility with respect to capital outlays, as rubbish handlers can scale back expenditures during troubled economic times, bolstering free cash flow. Such consistent, cash-rich business models have translated into a nice flow of dividends, particularly at the largest two domestic players, Waste Management (WM) and Republic Services (RSG). [Click to enlarge]With … Read more

How to Play the Coming Upswing in Commercial Aerospace

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/272730-how-to-play-the-coming-upswing-in-commercial-aerospace In this, the follow up to our analysis of the narrowbody airplane market, let’s dive into just how robust the delivery upswing will be in commercial aerospace during the next few years and highlight a couple interesting, diversified ways to play the coming boom. We’ll also dive into one of the best aerospace names to own for the long haul, but leave open for Part III of this saga, an in-depth look at this firm’s valuation and the analysis of yet another intriguing play to capitalize on this multi-year cyclical upswing. First, let’s get a feel for what to expect from Boeing (BA) and Airbus during the next five years in terms of … Read more

The Future of the Narrowbody Airplane Market

by

This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/272454-the-future-of-the-narrowbody-airplane-market As many long-time followers of Boeing (BA) understand, the firm’s decision on what to do next with its workhorse 737 (the plane best known for being flown by low-cost leader Southwest) could make or break the company during the latter part of this decade and into next. One of the key things Boeing has been trumpeted for in the past has been its keen foresight in building the revolutionary, mostly-composite, point-to-point aircraft–the 787 Dreamliner–while its main rival Airbus pursued the gargantuan A380 double-decker, the latter betting on the proliferation of the hub-and-spoke model and high-density flights between major airports across the globe. Though there is a market for both the … Read more