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Nautilus Inc. Message Board

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  • astral_tsar astral_tsar Jan 26, 2004 12:23 PM Flag

    Value Estimate -- Comments?

    ericvann --
    FWIW I think that both have had an impact and that competition really was the bigger factor.

    I think improving consumer sentiment coupled with Nautilus' fast and effective response to retail competition will quickly restore revenues to the over-600-million level. So yeah, I view a slice of the 2003 earnings dip as an immaterial "blip".

    But I think that competition was a larger and permanent change. Not nearly the world-shattering disaster that the shorts claimed, but it sets them back. Nautilus can easily and profitably compete with visibly crappy knock-off Bowflexes in the retail stores ... but it knocks their prices down. They can't switch off the low end anymore. The $1600 Bowflex Emasculator is not gonna determine the net margin anymore.

    Just to give the picture, here's my own crude "most likely" forecast:

    2002 revenues: $585M
    2003 revenues: $460M (glitch: fugeddaboudit)
    2004+ revenues: $600M+ & growing

    2002 net margin: 17%
    2003 net margin: 8%
    2004+ net margin: 8% (competition: live with it)

    Calculated from rev*margin above:
    2002 earnings: $99M....eps: $2.70 (diluted)
    2003 earnings: $37M....eps: $1.13 (options sumberged)
    2004 earnings: $48M...eps: $1.35 (diluted)
    2005+ dunno, but steady at $1.40 not a bad bet

    So in my view, a dollar or more of the earnings hit was "permanent" in the sense that the company now needs twice the revenues to get back to $2.50 per share, and the ROE available to fund that growth internally is also cut from 40% to 20% (after dividends, 12%).

    Anyway I think the competition whining was on target: cost cutting has made life less profitable for the Flex.

18.79+0.10(+0.54%)Jul 27 4:02 PMEDT