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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.
Home / Markets / Industries / Finance
Tuesday, July 22, 2008
Zacks Analyst Blog Highlights: General Motors, Amphenol Corp., Safeway Inc., POSCO and Kookmin Bank.
Comtex
CHICAGO, Jul 22, 2008 (BUSINESS WIRE) ----Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: General Motors (NYSE: GM), Amphenol Corp. (NYSE: APH), Safeway Inc. (NYSE: SWY), POSCO (NYSE: PKX) and Kookmin Bank (NYSE: KB).
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Here are highlights from Monday's Analyst Blog:
Concerns Mounting for GM
Weak North American sales, falling production volumes and rising raw material costs are increasing our concerns for General Motors (NYSE: GM). Significant incentives designed to stimulate sales and keep inventories lean are eating into margins. Furthermore, GM sales are hampered by poor resale values. The company is at a disadvantage compared to its competitors owing to huge pension and health care costs.
GM is undertaking a broad global assessment of its assets for monetization, which is expected to generate approximately $2 billion to $4 billion of additional liquidity. The company has suspended dividends on common stock. These compel us to rate the shares a Sell with a six-month target price of $10.00.
APH Stays a Hold
Amphenol Corp. (NYSE: APH) reported record revenues of $847 million in Q2:FY08, exceeding the Street's consensus of $816 million, on the back of strong growth in the interconnect segment. Given the recent run-up in the stock, we maintain our Hold rating with a target price of $49.
The company's top-line growth is benefiting from improved end-market demand, new product rollouts, and market share gains. We remain optimistic about Amphenol's long-term growth prospects in the mobile devices business. The company continues to expand the use of its products into fast-growing sub-markets such as PDAs, laptops, and desktop computers.
How Safe Is It Anyway?
Safeway Inc. (NYSE: SWY) reported disappointing sales that were $400 million below consensus, but just $47 million below our forecast. The difficult macro environment has consumers trading down to cheaper alternatives, and away from the company's Lifestyle stores. Even so, Safeway's second-quarter EPS were a penny ahead of consensus and a penny below our estimate. The upside was due to cost-cutting efforts and lower interest expense.
We continue to believe Safeway's remodeling efforts, Lifestyle stores, and Blackhawk gift card business will lead to solid long-term growth. Still, we think these positives are offset by near-term headwinds such as the difficult macro conditions and consumers trading down. We maintain our Hold rating. Our target price is $28, which roughly 11x our 2009 earnings estimate.
Costs Weighing on POSCO
POSCO (NYSE: PKX) is well-positioned to achieve long-term growth as the company is rapidly shifting production to higher-margin products and undertaking investments to secure low-cost raw material supply. Moreover, the company's new FINEX technology will provide meaningful cost-savings over the long term.
However, the company's margins may suffer from high energy and raw material costs like iron ore and coking coal. Moreover, concerns of an economic slowdown cast a shadow on the future steel price outlook. We reiterate our Hold recommendation on shares of POSCO.
Kookmin Now a Sell
We are reducing our rating on Kookmin Bank (NYSE: KB) to Sell from Hold given our expectations for slower growth in earnings. In addition, we are lowering our target price to $50. KB is expected to report second earnings on July 28.
We are cutting our EPADS estimates to $8.18 from $8.30 for 2008 and to $8.63 from $8.75 for 2009, solely due to appreciation of the US dollar against the South Korean won. We expect pressure on the net interest margin to offset loan growth, with only lackluster earnings growth over the near term.
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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 at http://at.zacks.com/?id=4580.
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SOURCE: Zacks.com
Zacks.com Mark Vickery Web Content Editor 312-265-9380 Visit: www.zacks.com
Copyright Business Wire 2008 ********************************************************************** As of Friday, 07-18-2008 23:59, the latest Comtex SmarTrend� Alert, an automated pattern recognition system, indicated an UPTREND on 07-17-2008 for APH @ $48.36. As of Friday, 07-18-2008 23:59, the latest Comtex SmarTrend Alert, an automated pattern recognition system, indicated an UPTREND on 07-18-2008 for GM @ $13.13. As of Friday, 07-18-2008 23:59, the latest Comtex SmarTrend Alert, an automated pattern recognition system, indicated a DOWNTREND on 05-08-2008 for KB @ $63.14. For more information on SmarTrend, contact your market data provider or go to www.mysmartrend.com SmarTrend is a registered trademark of Comtex News Network, Inc. Copyright � 2004-2008 Comtex News Network, Inc. All rights reserved.
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