with the tarriffs placed on paper from china proposed this week, there are expectations that tarriffs will also be applied to other sectors, specifically steel and textiles. nich is very dependent upon goods china/macau and other nations specified by the sec. of commerce this week for possible import tarriffs. tarriffs and quotas could ripple through nich and change the economics of the business somewhat. good news is that these first tarriffs won't be "in effect" until december 2007. not sure if this is the reason nich eased back down in stock price this week. hope it is over and that we go back up this coming week.
To assess the potential of a stock you need to figure out where the company has been and where it's going. NICH is trading in its low range for the year. So far it has had a much higher trailing PE than the one you would consider reasonable. Investors should be heading for the hills, by your logic.
Even if the last quarter results were a fluke and were favorably impacted by seasonality (you would also be discounting the record backlog, but let's assume for a moment that it's not there), the company's recent acquisitions create higher profit margins that would endure despite seasonality. That's a big deal for this kind of business. Like gigmbwng I've researched Nitches and their competition. I've come to the conclusion that a PE of 20 is well justified. I would greatly appreciate any substantial evidence to the contrary.
In my stock selection one issue that concerned me was NICH's debt. How exactly is it being used and what's the plan for dealing with it? I am too lazy to dig into this right now, after having contented myself with the fact that the debt along these lines is quite standard for this sector, but, again, any insight would be much appreciated.
The new glossy paper tarriff became possible by reclassifying China away from its designation as a nonmarket economy, now allowing sanctions to combat government subsidies. There are efforts to implement tarriffs on Chinese goods across the board due to devaluation of the Yuan and rampant intellectual property theft. This has nothing to do with the Special Administrative Region of Macau, the WTO founding member with its own currency and definitively market-oriented economy, or any other country.
NICH has always been very nimble and diversified with its source of manufacturing. China was the source of 22.7% of goods in FY2006, but only 2.7% in FY2005 and 0% prior to that. Conversely, sourcing from Cambodia fell from 36.4% in FY2005 to 12.8% in FY2006. Other countries that NICH is able to pick and choose from include India, UAE, Taiwan, Pakistan, Turkey, Sri Lanka, and even the good ol' USA.
A better explanation for the price weakness is anticipation of the registration of Haresh Tharani's 600,000 shares for Home Decor. People might think they can fleece him like they did with the Singh shares, but his strategy has been to sell smaller lots over extended periods of time during times of high volume. I believe the Singh shares were shorted ahead of time and then 'sold' when the price was low, hence the fleecing of the Singhs.
I started a position here with several thousand shares. I need more clarity before I put more chips on the table. Am I right to assume that NICH would make around 60 cents in 2007? That's what I came up with after doing some rudimentary cash flow analysis.