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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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Thursday, July 10, 2008
Zacks Bull and Bear of the Day Highlights: China Mobile, Hudson City Bancorp, Nationwide Healthcare Properties, Advance Auto Parts and Cree, Inc.
Comtex
CHICAGO, Jul 10, 2008 (BUSINESS WIRE) ----Zacks Equity Research highlights China Mobile (NYSE: CHL) as the Bull of the Day and Hudson City Bancorp (Nasdaq: HCBK) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Nationwide Healthcare Properties (NYSE: NHP), Advance Auto Parts (NYSE: AAP) and Cree, Inc. (Nasdaq: CREE).
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: China Mobile (NYSE: CHL)
China Mobile's market valuation has declined in recent months, based on what we believe are related to general global equity market weakness and additional levels of risk associated with the announcement of mandated telecom restructuring imposed by China's government. However, it remains our view that these emerging and restructured competitive entities will have unanticipated challenges deploying and advancing services to levels and coverage delivered by the incumbent.
Accordingly, we assess that successful expansion initiatives in rural regions of China, along with effective network optimization strategies and customized mobile value-added services, already establish China Mobile as the dominant mobile service provider, far ahead of competitors.
Bear of the Day: Hudson City Bancorp (Nasdaq: HCBK)
Even though the shares trade at a discount to the peer median (on a P/E basis), with 67% of the loan portfolio in residential real estate in the New York metropolitan area, considering the industry overhangs, we remain cautious given the current valuations. Our rating remains a Sell. Our six-month price target of $15.50 per share equates to a negative 11.7% expected total return.
Latest Posts on the Zacks Analyst Blog:
Nationwide Healthcare Properties (NYSE: NHP)
Nationwide Healthcare Properties is a real estate investment trust (REIT) that invests in healthcare facilities. The company's 1Q FFO (funds from operations) per share increased 12.0% to $0.56 per share vs. the year earlier quarter. Results came in $0.01 per share above our estimates. NHP continues to grow through acquisitions.
Going forward, the company will heavily increase exposure to medical office buildings (MOBs), which are attractive private pay investments. The company recently signed a potential $2 billion agreement to acquire MOBs over the next several years.
We rate the shares a Hold due to moderate 2008 growth prospects. NHP's current and future MOB purchases are well placed, high end assets, although, the acquisition comes with low in-place yields, which will only be slightly accretive to FFO in 2008.
Advance Auto Parts (NYSE: AAP)
We are maintaining our Hold Recommendation on automotive parts retailer Advance Auto Parts, Inc. until costs are contained and same-store sales improve. Though it is generating topline growth by opening new stores, the company currently faces a challenging industry environment. To combat the difficult industry metrics, the company has reviewed its business strategies to drive sales, lower costs, and increase return on invested capital (ROIC). We set a six-month target price of $38.00.
Cree, Inc. (Nasdaq: CREE)
Cree, Inc. is one of the leading producers of SiC and GaN-based LEDs. March quarter revenue was in-line with consensus expectations, although the bottom line exceeded. Forward guidance is for 3-6% growth in the June quarter.
The company is a technological leader in the market in which it operates. The potential for expansion into new end markets is substantial, and this potential is backed by an experienced R&D team. The company has a debt-free balance sheet and generates a healthy amount of cash from operations.
The global movement to energy efficient lighting is prompting lighting companies and consumers to look at other options. Therefore, lighting will be the strongest end market for Cree, likely followed by notebooks.
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: 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.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2677.
About Zacks
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=4582.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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 ********************************************************************** As of Sunday, 07-06-2008 23:59, the latest Comtex SmarTrend� Alert, an automated pattern recognition system, indicated a DOWNTREND on 07-03-2008 for AAP @ $36.36. As of Sunday, 07-06-2008 23:59, the latest Comtex SmarTrend Alert, an automated pattern recognition system, indicated a DOWNTREND on 05-23-2008 for CHL @ $79.46. As of Sunday, 07-06-2008 23:59, the latest Comtex SmarTrend Alert, an automated pattern recognition system, indicated a DOWNTREND on 05-22-2008 for NHP @ $34.01. 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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