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Spectra Energy Corp. Message Board

  • slcmbill294 slcmbill294 Nov 4, 1998 10:16 PM Flag

    Hey Bob, have you noticed

    the stock of IYCOY slowly moving up. What do you make of it?


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    • Bill, While I had my own idea of what ROE I would
      demand of Southland, I didn`t want to influence your
      jdgement, but your expectations are exactly in line with
      mine. I think the market wants at least 15% ROE from
      Southland, and because this is a higher risk turnaround I
      personally want to see a minimum of 20%. So in the future
      the earnings will have to rise or the price of he
      stock will have to fall until Southland`s ROE is in
      that 15-20% range. And I would add I use the 200
      million figure for the maintenance capital expenditure
      figure, which will help us determine just how well
      Southland`s management is doing with its strategies to
      generate earnings growth. And thanks for the ROE
      information on the competitors--good benchmarks for both
      investors and management. Bob

    • Bob, I researched SLCM's peer group and came to a
      rough estimate as to what ROE Southland should be able
      to attain. Below, I have listed 3 companies that fit
      into SLCM's peer group.

      Casey's General Stores
      ROE 13.71%

      Albertsons ROE

      Safeway ROE 32.62%

      My rough estimate would be
      in the 15% to 20% ROE category. This estimate
      however is for 2-3 years down the road. I believe it will
      be possible when debt is refinanced, capital
      expenditures return to 150-200 million annually, and sales
      slowly improve as they have. By the way, I liked the way
      you improvised by substituting market capitalization
      for SLCM's lack of equity to figure out an estimate
      of ROE. BILL

    • Bill, My carefully constructed Dupont System
      formula was garbled in transmission. Hope you can
      untangle it. The top line is the name of each item, and
      beneath it a more specific explanation of the term. Back
      to the drawing board! I have the more interesting
      specifics as it relates to Southland, but the garbled
      message makes me hesitate to follow it up until you tell
      me you have successfully untangled my message. Bob

    • Bill, IYCOY`s improvement reflects recent changes
      in money mamagers` attitudes towards the Japanese
      market I believe. It is a positive for Southland, but
      whether it proves correct about the Japanese economy`s
      recovery is something else.
      The DuPont System is a (now
      standard) financial model for all companies:
      Margin" X "Asset Turnover" = "Return on Assets"
      Income X Sales = Net Income
      Sales Total Assets Total
      "Return on Assets" X "Financial Leverage"
      ="Return on Equity"
      Net Income X Total Assets = Net
      Total Assets Common Equity Common Equity
      investors in common equity, it is the R.O.E. with which we
      are ultimately concerned. The Dupont System helps us
      look reality in the face, and to substitute"what if"
      figures to clearly see the company`s oportunities and
      risks. It also provides a common language of analysis
      amongst investors. TO BE CONTINUED. Bob

33.44+0.04(+0.12%)Jan 30 4:04 PMEST

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