OUTLINE:
*Each target price is (1) computed using CGFS' proprietary valuation and simulation approach and (2) adjusted within 3 standard errors of the estimate. Assumption and computation details are inserted at the end of each write-up.
This Week's Picks:
- Our Weekly Stock Picks*
- Macro Environment
- The Bond Report, What's next, & Key Earnings
*Each target price is (1) computed using CGFS' proprietary valuation and simulation approach and (2) adjusted within 3 standard errors of the estimate. Assumption and computation details are inserted at the end of each write-up.
This Week's Picks:
Aerosystems’ guidance shows confidence into the coming year. In fact, they have let know the investors that the cash on hand is not just in case of a business opportunity but also in order to repurchase some outstanding shares. This will have as effect to increase the earnings per share but also to elevate the market price of the shares. Moreover, in order to increase the value creation, they expect to invest into the segment of the defense, which during this period seem to be a good investment with a lot of business opportunities through the increase of 10% into the budget of the government’s defense. Finally, this cash will permit to the company to invest in vertical integration via Tier 2 or Tier 3 in the aerostructure supply chain, which produce an important margin. This will permit to SPR to increase their margins but also to increase their revenue; both combined, means additional company’s value. Furthermore, if we look at the WACC and the ROIC, we can see that the company is able to turn investment into profits at higher ratio with less costs than its competitors.
For the following years, Michael Kors will ensure revenue growth by expanding their retail store in the Asian market. At the same time, the company will be able to maintain its margin. While increasing revenue and maintaining its margin, Michael Kors should be able to create value and to increase the free cash flow for the following period. Finally, if Michael Kors win the bid of Kate Spread, it will ensure growth in revenue and will reduce the margins. I advise to buy Michael Kors Holding because it stock price is currently undervalued. I expect the price of this stock to rise in the future from $37.34 and $42.98.
The Internet of Things can be defined as the inter-networking of physical devices, vehicles, buildings, and others, embedded with electronics and network connectivity that can enable these objects to collect and exchange data. Simply put, this entails connecting any device to the internet. This market has been rapidly growing and is slated to continue that growth in the future, as constant technological improvements and the development of “smart” technology is on the rise. Sierra Wireless has long been among the industry leaders in bringing high-tech modules, gateways, and connectivity services to the market, and has enhanced that position over the years with numerous acquisitions and a broad product line. The company operates within three segments: OEM solutions, Enterprise Solutions, and Cloud and Connectivity Services. Financially, the company is debt free and re-invests back into itself to continually finance growth of the business. Moving forward, Sierra Wireless has positioned themselves nicely to continue to make advances in the ever-changing world of wireless capabilities.
Dick’s Sporting Goods is currently operating in the specialty retail industry. This industry has seen many companies fold due to the ongoing pressure provided from the e-commerce giant, Amazon. Dick’s Sporting Goods has managed to keep solid financials despite these pressures. Through 2017, Dick’s Sporting Goods plans to increase their sales in the e-commerce section which went up 27% in 2016 as a result of in housing their platform and ended a long term partnership with eBay. Dick’s will also be able to pick up market share that has been uncaptured due to the closure of close competitors over the recent years with an aggressive expansion strategy. The final initiative that Dick’s will incorporate to further differentiate themselves from their competitors is the consolidation of up to 20% of their vendors which will help grow margins. Dick’s Sporting Goods has made a name for themselves within the United States and remains a formidable opponent for years to come.
Orbotech Ltd. is one of the worldwide leaders in its industry. As a matter of fact, as the company provides superior equipment and customer services to manufacturers of electronic devices, it managed to capture and retain revenue in spite of the fierce existing competition. China, which is already one of Orbotech’s main sources of revenue, has significant potential for further market growth. The company will most likely get benefits from these opportunities to expand. These growing markets, coupled to acquisitions and increase in services revenue, will bring higher margins and returns in the future. As the company has almost no debt and can borrow at a low cost, it will have no trouble raising capital to finance the aforementioned expansions and developments that will create shareholder value in the coming years.