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ATRION Corp. Message Board

  • stillwater9999 stillwater9999 Feb 4, 2010 3:22 PM Flag

    20% correction

    We are about 20% below the 165 high. Anyone care to disclose what price they would be buying in ?

    I would say below 120 is certainly a buy for the long term. But that is conservative.


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    • I always look at this stock with the simple formula of [Share Price-cash per share]= EPS times P/E ratio for some point in time. The EPS is quite predictable within a narrow range, it's the P/E that bounces all over the place!

      For instance, I estimate 2010 eps as 9.80 with 19 per share of cash at year end. So at [131-19]/9.80, your implied forward P/E is about 11.5. Historically, the P/E has averaged around 16, so I would predict about a 175 price by year end. With a confidence level of about zero!

      Problem of course is predicting what P/E the market will put on the stock-- I have no clue as usual.

      But we have seen this movie before as I always say.

      • 1 Reply to microcapguru
      • My Bloomberg shows the high price as having been 162, not 165 on January 14th, which was the ex-dividend date.

        I don;t think they adjust that for a dividend, though.

        After adjusting the price down by the $6, I don;t quite think we are at a 20% correction level, though it is certainly substantial.

        While I like guru's valuation methodology very much and find it completely appropriate, I would add a second one to the mix, since, in valuation, two heads are better than one.

        I would look at Free cash flow yield, defined as Cash from Operations less Capital Spending as a percent of market capitalization.

        In this case, CFO for the LTM ended in September is about $27.5 million, and I am happy to use that as the total for all of 2009. Applying about a 6% growth rate for 2010 (a randomly chosen growth rate that I think is probably near the midpoint of probable outcomes), one gets CFO for 2010 of $29 million.

        For capex, for the 2004-2008 timeframe, the data is distorted by the spending on the new plant in FL that is unlikely to be repeated. Even in recent quarters, the capex figure has varied quite a bit. In 09Q2 and 09Q3, it was over $2 million each quarter, after having been just $0.86 million in 08Q4. I haven't looked into seasonality of capex yet. I am gonig to use $6 million as a capex estimate for 2010.

        Subtracting one from the other, I get $23 million as my FCF estimate for 2010. That is quite a bonanza. A virtual cashvalanche (yes, I just invented that word in an attempt at self amusement).

        Now lets look at the cash position, itself. The recent dividend was about $12 million, and we are paying out about $3 million on an annual basis.

        At 09Q3, cash was about $19 million, leaving 09Q4 cash at about an estimated $24 million, I am going to guess. Thus, the proforma cash after the dividend is about $12 million.

        Let's add to that the FCF of 2010 and we get a 2010 estimated cash position of

        $23 million FCF + $12 million 09Q4 cash estimate - $3 million regular quarterly cash dividend payments = $32 million. That's roughly $16 per share.

        So, taking the existing market cap of $270 million (2 million shares times $135 price this morning) and subtracting out the yearend 2010 cash of lets say $30 million gives us an adjusted year-end market cap less cash of $240 million at the current price. With FCF at $23 million for the year, I calculate the FCF Yield as

        $23 million FCF / $240 million market cap less cash = ~ 10%

        Is the stock attractive at a FCF yield of 10%.

        One can only tell that by comparing it to the returns available elsewhere, of course, including the return on holding cash.

        Calculating the FCF yields on other companies is certainly beyond the scope of this message board.


426.99+3.80(+0.90%)Oct 21 4:00 PMEDT