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Whether you're walking a tightrope or scribbling in your checkbook, balance is a good thing. And, one of the best ways to evaluate a company is to glance at its balance sheet to see what it owns with what it owes.
The balance sheet is a paragon of simplicity and is made up of three components: assets (the stuff it owns), liabilities (the money it owes), and shareholders' equity (the company's value to its shareholders).
Assets take two forms: short-term (or current) assets and long-term assets. Under short-term, there¿s good ol' hard cash. Then, there¿s something called "cash equivalents," which are assets like short-term bonds that can be sold so quickly, they might as well be cash. There you factor in inventory, which (if you're a reasonably competent business owner) you can sell to customers in return for--you guessed it--cash. (The raw materials a company owns to make that inventory also falls under this category.)
Long-term assets are things that are harder to convert into cash. (Think real estate and equipment.) Long-term assets depreciate, meaning they lose some value over time. Also under the long-term category are what's called intangible assets: things like patents and brands, that are important, but hard to quantify. Accountants earn their stripes figuring out the real overall value of these assets.
Once you know your assets, it's time for liabilities. As with assets, liabilities are separated into short-term or current, and long-term. Current liabilities are what a company owes in that year: Things like payments to employees or accounts payable to suppliers. Long-term liabilities are debts paid over several years.
Shareholders' equity is determined by subtracting the liabilities from the assets. That number represents the value of the company after all its bills are paid.
Obviously, investors should pay close attention to balance sheets. Spikes in the amount of debt carried, or a reduction in shareholders' equity, are usually red flags.
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Friday, April 25, 2008
Zacks Bull and Bear of the Day Highlights: Arch Coal, CEMEX, Tractor Supply Co., Anadigics and Apple
Comtex
CHICAGO, Apr 25, 2008 (BUSINESS WIRE) ----Zacks Equity Research highlights Arch Coal, Inc. (NYSE: ACI) as the Bull of the Day and CEMEX, S.A. (NYSE: CX) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tractor Supply Company (Nasdaq: TSCO), Anadigics (Nasdaq: ANAD) and Apple, Inc. (Nasdaq: AAPL). Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.
Here is a synopsis of all five stocks:
Bull of the Day: Arch Coal, Inc. (NYSE: ACI)
We are maintaining our Buy recommendation on Arch Coal and increasing our 2008 earnings estimate from $2.37 per share to $2.64 per share. With international and domestic coal prices at record levels, Arch's market driven strategy should help maximize its reserve base. Having significant unpriced volumes of 60% and 77% in '09 and '10, respectively, and recently pricing several million tons of 2008 unpriced production at significant premiums to Q1 08 prices, we feel that ACI will experience significant earnings growth in the near term.
Additionally, In Central Appalachia, nearly one third of its 2008 estimated production is metallurgical in nature. This type of coal fetches prices in the triple digits and should boost earnings and cash flow. We see very little downside to the company's story with large near-term upside potential.
Bear of the Day: CEMEX, S.A. (NYSE: CX)
We are keeping our Sell rating on CEMEX, S.A. de C.V. First quarter results were weak, even though the sale of a stake in Axtel improved net income. The continued weak cement volumes/revenues in the key U.S. and Mexican markets are problematic. We believe the construction business in the U.S. is already facing a more difficult environment, and that the short-term outlook for this industry remains highly uncertain, mainly due to the continued problems in the subprime mortgage segment. Moreover, concerns about real estate prices in Spain are also troublesome.
Latest Posts on the Zacks Analyst Blog:
Tractor Supply Company (Nasdaq: TSCO)
Tractor Supply Company's first quarter results came in below expectations, and management lowered its guidance for full-year 2008. The weaker-than-expected results were due to the consumer cutting back. Management now expects full-year EPS to be at or slightly below the low end of its previously provided range, which was $2.54 to $2.62. We reduced our EPS estimates accordingly.
That said, the company's store expansion plans, expanded merchandise mix, and operating improvements bode well for its long-term growth. But near-term issues will continue to pressure consumer spending, and that will cause TSCO's earnings growth to come in below trend for the next few quarters.
Anadigics (Nasdaq: ANAD)
Anadigics, Inc. recently reported Q1:2008 results, which topped our estimates. Revenues of $74.4 million, up 10% quarter-over-quarter and 50% year-over-year, exceeded our estimate of $69 million. Pro-forma EPS of $0.15 (excluding stock options expense) beat our estimate of $0.10. GAAP EPS was $0.07. GAAP gross margin improved to 35.8% from 32.8% recorded in the year-ago period and 34.7% in the prior quarter.
The company's wireless business (21.1% quarter-over-quarter growth) comprised 69% of its total sales and was the primary driver for Q1 revenue growth. However, broadband revenues were down 5.8% year-over-year to $23.2 million and down 8.5% quarter-over-quarter. WLAN/WiMAX was up 47%, while cable infrastructure results were down sequentially.
Going forward, management expects revenues between $77 million and $79 million in the second quarter of FY2008. Pro-forma EPS is estimated to come around $0.16-$0.17. ANAD reported strong Q1results recently with EPS of $0.15 on $74.4 million in revenues, which was much higher than street expectations of $0.10 on $69.2 million in revenues. ANAD's strong results were driven by stellar growth in the wireless business which expanded 21% sequentially and approximately 105% year-over-year.
Apple, Inc. (Nasdaq: AAPL)
The strength of Apple Inc.'s iPod business has carried over into its computer business, and we expect Macintosh to continue taking share from traditional PCs as consumers become more familiar with Apple products and enjoy the enhanced media capabilities. However, we are cautious on consumer spending going into 2008, and believe the market for AAPL's successful iPod line could slow over the next several years.
At its current price of $162.89 per share, Apple's stock is trading at 31.5x our fiscal 2008 estimate of $5.17. Apple's has established a strong track record of earnings growth, which went from a loss of $0.07 per share in 2001, to an expected profit of $5.17 per share in the current fiscal year. With a strong new product pipeline for 2008, including MacBook Air, Mac Pro, iTunes Movie Rentals, and major software upgrade and developer platform for iPhone 2, we believe the stock deserves a premium valuation to its peer group.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
SOURCE: Zacks.com
Zacks.com Mark Vickery 312-265-9380 Visit: www.zacks.com
Copyright Business Wire 2008
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