Saturday, August 02, 2008

New Addition to Top 25

In my contest versus MagicDiligence, we have a new stock in the top 25 this weekend: MSTR
This is a software company that was a go-go stock back in the good old internet bubble days. They are one of the few remaining independent business software companies. Many have been gobbled up by the likes of SAP, IBM and Oracle. Their price is $60.56, which I think is a steal. A nice thing about software companies is they can scale up with very little additional costs. Here are their ratios:

+ Operating Income After Depreciation 87.92
- Minority Interest - Income Account -
= Income for Calculation 87.92

Market Cap Yahoo 719,390

Share Price 60.56
+ Market Cap Calc 719.39
+ Preferred Capital -
+ Debt in Current Liabilities -
+ Long-Term Debt -

Cash and Short-Term Investments 102.10
- Excess Cash 62.71
= Enterprise Value 656.68

+ Property Plant and Equipment - Net 8.43
+ Receivables 44.73
+ Inventories -
+ Other Current Assests 49.00
+ Working Cash 39.39
- Accounts Payable 23.61
- Current Liabilities - Other 109.50
= Invested Capital 8.43

Earnings Yield 13%

ROIC 1043%

As you can see, they have a high ROIC. They have an unblemished balance sheet (something to look for certainly) I like the company and may buy them in next tranche (I have owned them twice before and have done very well).

They are masters (ha ha) at self-promoting. They do put out a lot of press releases. I think the one item to watch, and likely a primary reason the stock price is depressed, is their SGA expenses. In the first quarter they were $55m, up over 30% from a year ago. In today's competitive market and tough business climate, you've got to manage general expenses.

I would be remiss if I didn't comment on what they're spending their additional money on. They are focusing on application for the mobile business user. I do strongly believe that this is where future growth potential lies as people rely more and more on "near computers" such as Iphone, blackberries etc. That was my rationale last month for buying Nokia. I did see where they must be making some headway as I skimmed their press releases (View Summary MicroStrategy Offers Business Intelligence Reports and Dashboards on the Apple iPhone).

1 comment:

Albert said...

Maybe people have a hard time forgetting the ethical problems Mr. Saylor had, and that's why folks may shy away...