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FTD Companies, Inc. Message Board

  • johndaley404 johndaley404 Jan 8, 2014 9:40 AM Flag

    Terrible post spin-off stock reaction

    It's underperformed the Russell by 15% since spinning off, any ideas why? Hopefully, they decide to put out some investor plans at the meeting next week.

    Sentiment: Buy

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    • Nobody really knows what this is?

      Under the UNTD umbrella, FTD was a cash cow that they used to cover company weaknesses. Now standing on its own, FTD "should" show decent profitability and the stock will react to the news once it becomes available..

      Yeah, the underperforming stinks but I think most of that can be attributed to the fog generated by the spinoff. And yes, plans and commentary from the FTD board certainly would clarify things. I am expecting better days in the near future and thinking a $35 value by Valentine's Day is doable.

      • 1 Reply to burgresident
      • From the presentation on Monday, "The floral industry is highly fragmented and ripe for consolidation". "It takes a company with the brand recognition and market share such as FTD to be the consolidator."
        FTD is going to embark on a methodical buyout consolidation of the floral industry. One of the points they stressed repeatedly in the presentation was that they have a low debt position after the spin off, which, to the intuitive observer, gives them the space on their balance sheet to consolidate this industry. So, as the market is valuing the company today on its stated financials and past growth history (very average, typical, methodical business growth), when it becomes apparent to the market that FTD, if I am right, embarks on an acquisition binge to consolidate the highly currently fragmented floral industry, such a plan will significantly boost the earnings growth rate of FTD and the market will award the FTD stock a much higher PE multiple. Further evidence of this prospect lies in the fact that FTD, post-spin from UNTD, will NOT pay a dividend. What they are saying by this non-dividend for a company that would be a typical dividend payer) is that they see very significant growth opportunities ahead, and as such, they will retain ALL cash flow (hence, no dividend) to use for acquisitions and business growth opportunities. I think I recall that in a typical year they produce $40-50 million in free cash flow. They will retain this and use it for acquisitions, along with the flexibility on their balance sheet to take on additional debt to fund their acquisition plans. The next 12 months will show if I am right in my prognostication. But the time to buy is now, because once Wall Street realizes this company is going to boost its annual growth rate materially, the stock price will move up smartly to begin to discount that faster rate of earnings growth. Mark this post! 1)Post-spin companies outperform the market, 2) there is a rational reason why they're spun.

 
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