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Валгрин Ко. Message Board

  • stockmeister999 stockmeister999 Jan 5, 1998 3:36 PM Flag

    Sell

    I bought 10000 at 20.........sold today. Better get out while you still can with a profit.....she'll be down to 15 by April. Look at the long term......you'll see.

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    • ok, so please explain a discount rate to the rest of us. thanks.

    • Stockmeister999 -

      Why do you see the price going down so quickly?

      WAG has proven to be a reasonably steady stock and are planning to expand a lot during the next couple of years. With the increase in their potential customers (aging Baby Boomers) they have the potential to see increasing revenues, or at least steady numbers. I made almost 50% over the last year,but do not expect to make that much in the future, but why do you see the drop? Is there a fundamental reason that I'm overlooking or do you have a bad feeling that the sky is going to fall?

      Thanks for any info you can give.

      Steve

      • 1 Reply to ys1409
      • I do not agree that $15 is a likely price target in the near-term, however, as I have previously stated, I do foresee a substantial price drop. Why?

        1.) The earnings are growing at a 15% rate. This would indicate a PE of nearly the same. The current PE is in excess of 30. At a PE of 15, the price would be...$15. Even if you took PE as a multiple of NEXT years earnings, as some do, it would only bring a price of $17-$18.

        2.) The historic PE, over the past 5 years, has been in the mid-20 range. At the current ratio, it is at a 5 year high.

        3.) Yes, the company is on a rapid pace of expansion. They reported 59 new stores in the past quarter. Did you know that 20, or 1 in 3, was a replacement of an existing store. That usually generates some new revenues, but not what you'd get from a true 'new' store. I think a lot of people have over-estimated the expansion in not realizing how many stores were replacements.

        4.) The earnings this quarter were on target. Not a bad thing, except that the previous two quarters beat expectations. This is something a lot of investors look for. Since it didn't happen this time, they may invest elsewhere. It might also be perceived as slowing of growth.


        As I said, I somewhat doubt $15; $20-$25 would not surprise me. I'd welcome it as an opportunity to increase my holdings; something I won't do right now.

 
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