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Zumiez, Inc. Message Board

  • maclad04 maclad04 Aug 19, 2005 3:35 PM Flag

    Valuation fun

    Let's see:

    [1] We all agree that ZUMZ is hitting a niche or a "sweet spot" in the retailing environment.
    [2] It would seem that for the time being anyway that ZUMZ has good management.
    [3] ZUMZ is poised for growth.

    However, where we disagree is on a stock price target. I disagree strongly that ZUMZ will be trading in the low to mid 20's, and see $50 this time next year as unlikely [possible, but unlikely], unless there is some massive growth explosion in the stock. I have no idea what this catalyst would be other then expansion, and at the 20% sq. ft. growth rate, the expansion is manageable. Too fast and the cash burn rate cuts in to profits, growth organically through cash flow is optimal, hoard the cash and grow too slow, and the stock price will wither on the vine.

    Anyway, if you have a valuation based on anything but a SWAG I would love to hear it. I am a student of Investment Valuation, Aswath Damodaran, and am using a 2-stage DCF model for my price targets. I have been doing this a long-time, and am pretty good at it. [See ZUMZ CC highlights message #11 for further details].

    Recently, there have been stories in the financial press of how Damodaran [at Stern, NYU] has given a price target for GOOG stock of $125 and change. It all depends on the growth rate baby! I have e-mailed Dr. Damodaran and asked for a spreadsheet or a link to see how this number was achieved. With price targets on GOOG from $111 to $400 there is no shortage of opinions.

    Anyway, I guess for the time being we have ST-targets from $26 to $34 [3 months] and LT-targets of $37 to $50 [6 to 9 months]. It will be interesting to see where ZUMZ ends up. Personally, I feel that unless you have an objective price target in your head, it makes it very difficult to trade stocks. I am saying buy until $32, and hold any price above.

    This Fall should be good [for ZUMZ] then we will have the inevitable B.S. that occurs every year with the financial press and CNBC talking about how the holiday season won't be very good only to have that sentiment turned on its head a few weeks later close to the end of year.

    Good luck all,
    Mac

 
ZUMZ
27.48-0.62(-2.21%)Oct 1 4:00 PMEDT

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