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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 Analyst Blog Highlights: Cree, Inc., Philips Electronics, General Electric, SurModics and Merck
Comtex
CHICAGO, Apr 25, 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: Cree, Inc. (Nasdaq: CREE), Philips Electronics (NYSE: PHG), General Electric Company (NYSE: GE), SurModics, Inc. (Nasdaq: SRDX) and Merck (NYSE: MRK).
See the latest posts to the Analyst Blog:
http://www.zacks.com/blog/post_info.html?g=6
Here are highlights from Thursday's Analyst Blog:
CREE Strong in Hot Markets
Cree, Inc. (Nasdaq: CREE) is one of the leading producers of light emitting diode (LED) based on Silicon Carbide (SiC) and Gallium Nitride (GaN). March quarter revenue was in-line with consensus expectations although bottom-lines exceeded. Forward guidance is for a 3%-6% growth in the June quarter.
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. New product ramp-up costs will be increasingly offset by yield improvements, higher capacity utilization, larger wafers and offshore production.
The LED market is hot in our opinion, and the LLF acquisition opens up a new opportunity. Consequently, we are reiterating our BUY rating on CREE shares. CREE shares are currently trading at a 53.9x multiple of our 2008 EPS estimate (P/E).
While new product start-up costs remain a drag on margins, the company has the new-age lighting technology that should bring significant revenue growth. Cree has already started seeing some of this growth, and the recent LLF acquisition is expected to enable direct entry into the commercial and residential lighting markets. The market for LED lighting looks good with Philips Electronics of the Netherlands (NYSE: PHG) investing a billion dollars in acquiring the technology, and General Electric Company (NYSE: GE) making several smaller bids.
Costs, Growth Balance SurModics
SurModics, Inc. (Nasdaq: SRDX) provides surface modification and drug delivery technologies to medical device and pharmaceutical companies. Acquisition of profitable companies, the I-vation deal with Merck (NYSE: MRK) and growth in other operating segments have enabled the company to reduce its dependence on Cypher stent sales, which formed a major part of the company's revenue till 2007. Going forward, the diversified revenue stream should enable the company to post sustainable growth despite falling Cypher stent sales.
We are impressed with SurModics's efforts to diversify its revenue base. While the recent acquisitions will enable the company to deliver strong top-line growth, the company is utilizing its cash position to enter into development agreements and share repurchase programs.
However, the shift in revenue base has exposed the company to higher operating expenses. Higher operating expenses accompany the shift in the company's revenue base. As such, we maintain our Hold rating on the stock with a target price of $48.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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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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.
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 Web Content Editor 312-265-9380 Visit: www.zacks.com
Copyright Business Wire 2008
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