By: GZ on Venerdì 26 Gennaio 2007 02:45
Komag il Bob Marcin, che è un mago per i "deep value" cioè i titoli che hanno un valore economico intrinseco, oggi su TSC la chiama l' "azione meno caro del pianeta" (tecnologica)
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...At $34 per share, the stock trades for about 8 times earnings, 4.4 times pretax cash flow and 1.0 times revenue, and it provides a 13% free cash flow yield. One would have a hard time finding many tech stocks with cheaper valuations.
Not Without Challenges
Now this cheapness always comes with some issues, and Komag is no different. Analysts are trimming their earnings estimates as the company reverts to a more normal margin structure from last year's shortage-condition profits. Komag also has a concentrated customer base.
Finally, the company needs to transition its technology to emerging perpendicular recording disks, new customers and the rapidly growing notebook market. Komag contends it is well on its way to achieving all three.
Wall Street, having loved the stock at $54, now hates it at $34. Komag is the go-to "sell" stock in the most-underappreciated tech sector: hard-disk drives. For some reason, not a single sell-side analyst has even a buy on the hard-disk-drive sector. Despite strong, 15%-plus unit growth, healthy profitability and much better competitive dynamics after consolidating, the industry has few fans. I guess the nosebleed P/E multiples of 8 to 10 are scaring everyone away.
At current prices, Komag represents a very interesting idea. Should the company manage its transition gracefully and resume strong growth with no further margin compression, the stock could easily hit a new high within a year. However, should the business taper faster than I expect, a stock that's down almost 40% and trading at compelling valuations should offer some downside protection
Part of the success of my process is the sell discipline. If Komag experiences a material decline in earnings, I will sell the stock immediately. By definition, it will no longer be a low-P/E stock.
But for now at least, the industry and the company are doing just fine. Take advantage of a panicky analyst community and an aggressive group of very loud shorts. They are providing one compelling buying opportunity for the cheapest tech stock in the world.