As far back as June 12, I suggested TBSI may see the 27/28 area....and here is that post...
I thought we would hit it sooner, but hey! We definitely reached the high 20s today. It just took longer.
Now look at this chart, and does anyone else see any longer term support in this area?????:
Now I come back to valuations. This has a P/E of just 6.5 now, on TRAILING earnings. Analysts (not me) estimate earnings at $6.70 THIS YEAR! If you use the SAME incredibly low PE of 6.5 that sits on the stock today, you will get a valuation of $43.55 (6.5 x $6.70), which is 43% higher than the current price.
A proper P/E ratio should equal the long term (10 year)growth in earnings per share. Your analysis is a result of assumptions in the long term EPS growth rate. 10 years is used to strip out all kinds of volatility. Although, volatility does play a factor - as someone pointed out today.
So, how fast can TBSI grow earnings annually over the next 10 years?? The S&P 500 grows at 11% on average annually, and has for 100 years. Is it unreasonable to assume a 10% growth rate, and hence a 10 P/E?? I don't think so - especially given the track record of TBSI so far....which will grow earnings 91% this year if analysts are correct. Analysts have consistently UNDERestimated earnings.
If I assume a 10 P/E.....I get a stock worth $67. I think the P/E should be higher though. But Wall Street moves in herds.....selling when everyone else does, and buying when everyone else does. These price drops are what creates opportunity. I'm not suggesting the drop in TBSI is over yet. But it could be in another day or so.
Neil, you wrote another message saying you bought at 30. Anybody could be wrong on price movements, but I don't think that was a bad idea given the data presented here - both technical and fundamental.
Sheeesh! I wish others would present something useful!
The support level I pointed to appears to have held. Will it continue or not?? Hopefully.
What I find amazing is how many shorts show up on the board....after being away for months.....just as the stock hits a major technical support. It's as if it is some lame attempt at trying to make it break below support.
C'est la Vie!
<Is it unreasonable to assume a 10% growth rate, and hence a 10 P/E?? >
The short answer is yes - it is absolutely unreasonable to assume a long-term rate of growth of 10%. You are not appropriately assigning the risk inherent in this business. Applying a P/E or earnings yld is essentially computing this as a perpetuity - which it is not. I may not be able to tell you where TBSI will be five years from now, and I may not be able to tell you what the BDI will look like, but I can tell you that you will not see 10% CAGR in earnings (maybe 250% or -80%)
For instance, (no one really knows), but let's say that the supply of ships does not increase as expected and that the BRIC economies rebound from the softening, and the BDI explodes back to historic highs. The short-term growth will not be 10%, more like 100%. Any and all ship acquisitions will be quite accretive to earnings, as ship market values go back to historical highs and TBSI's fixed costs remain based on yesterdays lower prices.
However, let's say instead that the past two years causes the expected rush to market, you have too many boats competing for less and less shipping requirements as the BRIC economies continue to slow. The BDI may crash and the earnings will crash with it. So let's say we have -50% earnings growth as a result.
Now sure, one can say that the probability is higher on one side or another, but at the end of the day, averaging a P/E of 10 would imply consistency and stability - not the industry this company is in.
No offense Money, but I tend to think you try to make anologies between this company and the general market - which is not a good comparison. A commodity player is a commodity player is a commodity player. It will oscillate between gold rush and bust based on market prices (go see CALM as an example of the same thing outside of shipping).
In my experience, the best time to buy TBSI is when you could cut their earnings in half and based on the price you pay, you would still feel like you got good value for your dollar. The easiest way to do that is to simply keep your P/E low - i.e. 5 or 6 times - and guess what - that's what the market is doing.
$30 is definitely a strong support Money, I agree. The market is down currently and TBSI is up over 3%. Hmmm...I wonder if earnings will be good? I believe someone thinks so with this volume.
my uneducated guess is day traders taking advantage of yest. selloff to buy now and sell on the earnings report. hate it but fact of life anymore. no wonder the general market is all over the place.
good luck to all
dunno $_for_0, when you have scintillating insight like we get from jonnierox it's hard to get too excited about anything as mundane as miniscule PEs and PEGs and consistent and massive earnings growth.
I am very happy with your analysis and have been cost averaging down this whole time, including today. I think it might be possible to see earnings of something like 1.75 to $2.00 tomorrow. Heck, if we miss this stock should still go up if you ask me. Tomorrow from a traders standpoint and the next 5-10 years from an investment standpoint should be great for this stock. Thanks for the analysis and don't waste your time being too upset with the idiots; this is a yahoo message board so they tend to gather here. TBS to the skI tomorrow.
I met and have spoken to the CEO several times this year. He is very bullish on the growth of his business line. He is buying second vessels left and right because the rates and volumes with his customers are exceptionally accretive. Huge backlog of demand on the tweendecker service that serve small ports in South America and Asia. TBSI float is relatively low as compared to the number of vessels.
My only negative with management is the lack of a dividend and that Royce sold 2 million shares earlier in May (at $51/share). I think he should take a little pause on buying vessels at inflated prices and use the cashflow to buyback stock at these discounted prices. With 28mm shares outstanding, TBSI could afford to buy back about 1mm shares every quarter.