PPD -this is a rather unique stock. They provide pre-paid legal services. I am not sure if anyone else does this, though I have seen some adds with Robert Shapiro selling Legal Zoom dot com, which might have some similar elements. I suspect most people don't want to trust the internet for legal services, they'd rather be face-to-face with an attorney. I know I would.
I have decided that the biggest question to ask regarding any MFI stock is whether they can replicate or improve last year's earnings. If they can't do that, then the follow-up question is would you still buy the stock with lowered earnings? Here is my calc of the ratios for PPD:
| ppd | ||
| + | Operating Income After Depreciation | 94.43 |
| - | Minority Interest - Income Account | - |
| = | Income for Calculation | 94.43 |
| Market Cap Yahoo | 528,230 | |
| Share Price | 43.44 | |
| + | Market Cap Calc | 528.23 |
| + | Preferred Capital | - |
| + | Debt in Current Liabilities | 18.26 |
| + | Long-Term Debt | 51.86 |
| Cash and Short-Term Investments | 32.17 | |
| - | Excess Cash | 11.89 |
| = | Enterprise Value | 586.47 |
| + | Property Plant and Equipment - Net | 56.79 |
| + | Receivables | 5.64 |
| + | Inventories | 1.56 |
| + | Other Current Assests | 28.17 |
| + | Working Cash | 20.28 |
| - | Accounts Payable | 15.41 |
| - | Current Liabilities - Other | 40.24 |
| = | Invested Capital | 56.79 |
| Earnings Yield | 16% | |
| ROIC | 166% |
Obviously strong numbers, else would not be in top 25. They are trading at $43.44 with a 52 week range of $39.45 to $71.49. Looking at their balance sheet, they have $52m of debt, down from $70m a year ago. They cover their debt payment over 20x with income, so I don't think that is a major concern.
Their revenue has been very flat the past 5 quarters. In the current econmic environment, that isn't so bad. They have done a great job managing expenses, so not much expense ratio pressure.
It looks like no analysts follow the company, so we can't get a peg on whether they think the company will continue to make money.
They are actively buying back their stock with free cash flow and they are actually reducing share count ( down in past year from 13.348m to 12.116m) and plans in the hopper to buyback another million.
I like this company and their business model. I'd rate them a buy. They seem like a classic MFI stock. Cheap and a good company that could grow with little additional capital. What do other people think?
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2 comments:
PPD was on the list when I first started using MFI. I didn't buy it in my first basket, and (since I'm a lawyer) regretted it a few months later as the stock price went much higher. I didn't check to see whether, over the course of the year (i.e. from Jan 07 to Jan 08) I would have made some money, but this is not the first time the stock's been on the list...
PPD has been on various lists for over past two years. I meant it was new to the top 25 since October 2007.
MG
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