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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 / Industrials
Wednesday, May 21, 2008
Zacks Analyst Blog Highlights: Integrated Device Technology, Cooper Tire & Rubber, Kongzhong, Gerdau S.A. and Methanex
Comtex
CHICAGO, May 21, 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: Integrated Device Technology (Nasdaq: IDTI), Cooper Tire & Rubber Company (NYSE: CTB), Kongzhong (Nasdaq: KONG), Gerdau S.A. (NYSE: GGB) and Methanex (Nasdaq: MEOH).
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Here are highlights from Tuesday's Analyst Blog:
Integrated Device Stays a Hold
Semiconductor OEM (original equipment manufacturer) Integrated Device Technology (Nasdaq: IDTI) should benefit from higher sales of its Grantsdale chipset and new products in the current quarter. However, positive developments in the communications sector are not likely to last long.
Even though the acquisition of Integrated Circuit will increase the size of the firm by 40 percent, we remain concerned that the addition of SigmaTel, Inc.'s PC audio division could hurt IDT's margins.
We expect share upside to be limited until the state of the world economy is a little clearer. Shares are likely to trade in line with the industry group in the near-term. We continue to rate shares of IDT a Hold with a target price of $12.
U.S. Keeps Cooper Tire a Hold
Cooper Tire & Rubber Company (NYSE: CTB) specializes in the manufacture and marketing of automotive products. A focus on improving product mix and lowering costs is likely to improve the earnings prospects of the company in the long-term. The company is working constantly to increase its capacity in order to meet the rising demand for replacement tires in the high performance and ultra-high performance categories.
The company's International segment is delivering strong performance in both Asia and Europe. However, a challenging North American auto environment makes us rate the stock a Hold with a six-month target price of $13.50.
A Bit of a Slip for KONG
Kongzhong (Nasdaq: KONG) announced a decrease in profits for the first quarter due to rising expenses. Its revenue met market expectations, but its EPS missed the market consensus. Revenue has increased sequentially for the past three quarters.
Although we are not optimistic about its prospects in the near term due to the tough WVAS operating environment, the company still has enough cash to look for another source of revenue growth in the future. The low P/B ratio of the stock can provide some support for its stock price.
Therefore, we are maintaining our Hold recommendation for the stock. Based on our estimate for fiscal year 2008 earnings per ADS, the stock is trading at 25.5x, which is slightly below that of the industry mean. Based on our estimate for fiscal year 2009 earnings per ADS, the stock is trading at 17.7x, which is far below that of the industry mean. Using a P/E multiple of 19.2x our fiscal year 2008 earnings per ADS estimate of $0.26 yields a target price of $5.00.
Brazil's a Buy Up to $55
We are upgrading our recommendation on Brazilian steelmaker Gerdau S.A. (NYSE: GGB) to Buy from Hold, after the company posted excellent results in the first quarter. Gerdau has been benefiting from rising steel prices, despite a challenging international economic environment in recent months.
Continued demand for steel from China, a strong Brazilian economy, and its strategy to grow through acquisitions create a positive environment for Gerdau. Despite the recent hike in the interest rate, we believe the Brazilian economy remains encouraging, mainly after being upgraded to investment grade by Standard & Poor's. Gerdau's investments in different companies should also generate huge revenues and earnings growth in the following years.
The Sweet Smell of Methanex
Methanex (Nasdaq: MEOH) is the world's largest producer and marketer of methanol. The company is benefiting from improving fundamentals and lower costs. The company is also benefiting from declining average gas costs as well. The company has strong cash flow that drives dividend increases and stock buybacks.
The company has strong cash flow, which drives dividend increases and stock buybacks. The company continues to increase its share repurchase program and announced that the Board has approved the purchase of up to 7.9 million common shares representing about 10% of the total public float.
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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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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=4580.
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 ********************************************************************** As of Saturday, 05-17-2008 23:59, the latest Comtex SmarTrend� Alert, an automated pattern recognition system, indicated a DOWNTREND on 03-17-2008 for CTB @ $16.26. As of Saturday, 05-17-2008 23:59, the latest Comtex SmarTrend Alert, an automated pattern recognition system, indicated an UPTREND on 04-03-2008 for GGB @ $34.03. 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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