The Peso is down 10% versus the dollar since October. This helps in two ways. Operating expenses like wages to Mexican workers go down in dollar terms. Since the Yuan is about flat to the dollar over that period, this creates a bigger advantage versus Chinese manufacturers.
SMTX showed a loss of $0.15. However instead of getting a tax credit for the loss it actually paid taxes, a lot of taxes. If they had gotten a normal tax credit the loss would have been $0.05. There also was a $1.9 million loss on a derivative. The derivative appears to be a currency futures contract. That is a non-operating loss. Operating income with a normal income tax rate was about $0.12. Quite good.
I'm also a little put off by the level of expenses. Last time revenues reached this level NTWK was solidly profitable. Part of the higher expenses is higher amortization of development costs of the new Ascent product. A bigger part is higher labor costs. Management has consistently said that higher revenues are coming and they need more staff to support the higher revenues. They have been proved right on the revenues. So their comments about the need for still more staff due to expected more growth in revenues is credible. Also some of the labor is needed for start up costs of new contracts which should recede in time. I expect the company to be profitable in the second quarter of 2015.
I'm still worried. The line is being cut by more than half and the rate raised. STRL will have to raise more equity if they can't replace the line by September.
The good news is STRL could always get a factored line. Factoring is when you sell you receivables to a lender who is paid directly by STRL's customer. The bad news is the interest rate would go up by at least 3 times. The good news is STRL historically hasn't had the balance it has now on its line so the cost won't be that great. The current high balance should come down as it bills for its high level of unbilled work performed.
Not sure how I initially calculated that. Operating loss was -$1.2 million. Add back the $1.9 million derivative loss and adjusted pretax earnings were $0.7 million. After tax its $0.5 million or $0.03 per share.
The sale of the loan portfolio is NOT a good idea. Any one buying that portfolio will want a profit on it plus additional compensation for the risk. CONN will essentially sell away a significant portion of its future profit, as that profit will go to the buyer. This is a panic move. My hope is the offers will be too low for CONN to do it. Now if they sell a relatively small portion of the portfolio to get their debt to equity ratio and interest rate down, that's a different story.
While I expect the stock price to be down tomorrow I don't expect the decline to be that big. HTCH along with Seagate and Western Digital have already fallen over 25% mostly due to expected lower revenues. It's priced in.
If KTCC shoots up after this next earnings report consider rotating to SMTX. It's in the same business and about half the size. Sales have stagnated due to the loss of two large customers (sound familiar?). The new CEO has taken them from losses to an operating profit. Still about two quarters from really taking off. Oh and it's trading at about 10% of revenues.
Quite the surge in deposits last quarter and a lot of the new deposits were non-interest bearing. Deposits had previously lagged loans in growth considerably. Bodes well for earnings growth going forward.
Zachs has no credibility. Their analysis is at the first grade level. Goldman is seeing a 40 PE ratio on a stock with maybe 8% EPS growth this year.
It's amazing we are getting strong same store sale growth despite the credit tightening.
They only earned $0.75 in the year ago quarter ended 1/14. Earnings are not going to jump over 50% in one year. I hope your right but it is unlikely.
After backing out the currency swing, adjusting for the impairment, and assuming a normal level of taxes, I get earnings of $0.18, the same that they reported. Annualized, that is $7.20. That puts the current PE at about 8, less than half that of the market.