At $6.40, Nam Tai Electronics (NTE) is worth buying for its yield alone. The yield combined with the capital-gains potential makes it a steal.
I estimate fair price to be roughly $22.
Income The estimated annual forward dividend rate of 0.88, gives a dividend yield of over 13%.
(0.88/$6.40) X 100 = 13.75%
The yield, by itself, is higher than the historical total rate of return in the stock market of 12%.
Furthermore, the dividend is paid quarterly, which should make it attractive to investors seeking a high rate of regular income.
High Growth with Low Debt Revenues have grown from $406 million in 2003 to $781 M in 2007. Profits have surged from 0.98/share to $1.55. High top-line and bottom-line growth with a negligible debt/equity ratio of 0.031 (3.1% of equity) means that Nam Tai is well-managed and profitable over the long term.
Potential Over 5 Years NTE has good potential to double as it is trading at less than half of the industry average in relation to sales and book value. Nam Tai is also contrarian, which is to say it is cheap in relation to its own trading history.
Price / Sales Ratio The price/sales ratio is about 0.42, which is historically cheap for Nam Tai, as well as for the Diversified Electronics Industry.
Price / Earnings Ratio The low price/sales ratio gives substantial potential to increase profits with higher margins. Higher profits will, in turn, lower the price/earnings ratio. The trailing p/e is 4.6.
Price / Book Ratio Nam Tai is also cheap in relation to book value. The price/book ratio is 0.82.
Contrarian Calcuation Nam Tai is also good value in relation to its own trading history. In the last 5 years, it's been as high as about $40 and as low as about $5. Averaging these 2 extremes, we get:
($40 + $5)/2 = $22.50
This means that NTE is trading at less than half its "average" price of the last 5 years.
The most conservative estimate of fair value of Nam Tai is therefore $22. At $6.40, the stock has huge upside potential.
To view a portfolio of thoroughly researched stocks and learn more about contrarian value investing, please visit my website at:
Good luck getting to $22.50, even during the LCD TV boom a year ago the highest value was $15
I think its a pretty good deal here though, it probably can get back to $8 or $9 very easy. Sales comparisons have sucked this year to date although the company is still making a decent gross and net profit. Probably the dividend will be cut next year so careful buying for yield.
This market is a fire sale and big funds are just puking up shares. I don't think its trading on fundamentals at all. Funds trying to convert whatever shares they can back into cash to cover withdrawals and some smart shorts who realize what is happening and that they they can keep it priced low during this period.
I would love to see $22/shr., but I agree that $9/shr. is much more realistic, once the panic ceases. It is amazing how many stocks are now trading at single digit PE ratios, paying dividend yields in excess of 5%. The market seems to be pricing an economic depression into share prices. The entire oil services sector is behaving like oil is headed to $20/bbl.