Tag Archives: Fail Improving

Business, Finance, Occupation & Industry

Is BlackBerry Destined for Greatness?

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By Alex Planes, The Motley Fool

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Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does BlackBerry fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

What we’re looking for
The graphs you’re about to see tell BlackBerry’s story, and we’ll be grading the quality of that story in several ways:

  • Growth: Are profits, margins, and free cash flow all increasing?
  • Valuation: Is share price growing in line with earnings per share?
  • Opportunities: Is return on equity increasing while debt to equity declines?
  • Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at BlackBerry’s key statistics:

BBRY Total Return Price data by YCharts.

Criteria

3-Year* Change 

Grade

Revenue growth > 30%

(26%)

Fail

Improving profit margin

(78.8%)

Fail

Free cash flow growth > Net income growth

(6.7%) vs. (126.3%)

Pass

Improving EPS

(128.5%)

Fail

Stock growth (+ 15%) < EPS growth

(78.9%) vs. (128.5%)

Fail

Source: YCharts. *Period begins in Q1 2010 (February).

BBRY Return on Equity data by YCharts.

Criteria

3-Year* Change

Grade

Improving return on equity

(118.5%)

Fail

Declining debt to equity

No debt

Pass

Source: YCharts. *Period begins in Q1 2010 (February).

How we got here and where we’re going
BlackBerry’s shortcomings are by now well-known, but its fundamental deterioration is not as complete as many investors may think. Free cash flow has actually held up better than revenue, which is rare, and BlackBerry has long operated debt-free, which gives it a lot of flexibility to fight back against the industry leaders. The big question remains: Can BlackBerry effectively fight back? It’s earned only two passing grades this time, and will need a monster performance in 2013 to get back into positive territory.

BlackBerry’s latest earnings report proved to be a mixed bag several days ago. Despite the earnings beat recorded for the fourth quarter, shares barely budged. The company also sold a million Z10s, many of which went to first-time buyers (who switched from other operating systems). Cash balances even held up better than expected. So why the mixed bag?

Well, let’s start with the obvious: BlackBerry is so far behind smartphone OS market leaders Google and Apple that its market share barely even registers. At this point, the former Research in Motion has slowed to a crawl, and is losing ground to Microsoft‘s Windows Phone OS — but beating Microsoft only lands BlackBerry back in a distant third place. BlackBerry was once the king of “smartphones” before most people used the word to describe the category. Since Apple (and then Google) arose with a new touchscreen mini-computer standard of design, BlackBerry’s been struggling to catch up.

The problem with that effort is pursuing a “me, too” strategy in the smartphone …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Texas Instruments Destined for Greatness?

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By Alex Planes, The Motley Fool

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Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Texas Instruments fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

What we’re looking for
The graphs you’re about to see tell TI‘s story, and we’ll be grading the quality of that story in several ways:

  • Growth: are profits, margins, and free cash flow all increasing?
  • Valuation: is share price growing in line with earnings per share?
  • Opportunities: is return on equity increasing while debt to equity declines?
  • Dividends: are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at TI‘s key statistics:

TXN Total Return Price data by YCharts.

Passing Criteria

3-Year* Change 

Grade

Revenue growth > 30%

23%

Fail

Improving profit margin

(59.1%)

Fail

Free cash flow growth > Net income growth

54.4% vs. 18.9%

Pass

Improving EPS

31.3%

Pass

Stock growth (+ 15%) < EPS growth

40.4% vs. 31.3%

Pass

Source: YCharts.
*Period begins at end of Q4 2009.

TXN Return on Equity data by YCharts.

Passing Criteria

3-Year* Change

Grade

Improving return on equity

0.2%

Pass

Declining debt to equity

61.7% (since Q2 2011)

Fail

Dividend growth > 25%

75%

Pass

Free cash flow payout ratio < 50%

28.1% 

Pass

Source: YCharts.
*Period begins at end of Q4 2009.

How we got here and where we’re going
Most mature companies struggle to earn passing grades on many of these growth tests, but TI puts in a solid showing, earning six out of nine possible passing grades. The only real failing in the company’s progress is a deteriorating profit margin. Can TI push that margin higher by the time we examine it next year? Let’s dig a bit deeper into the company’s potential in 2013.

We know one area that won’t offer TI any potential for growth this year: mobile. That’s because the chipmaker made a high-profile decision to stop developing for the space last year, citing the fact that many large customers were beginning to produce chip designs in-house. According to Foolish tech analyst Evan Niu, that may have been the right choice. Samsung has long developed most of its chips in-house, and other major mobile makers (say that five times fast) either are doing the same, or soon will. Licensing ARM Holdings‘ reference designs, tweaking them for efficiency, and outsourcing the fabrication to Taiwan Semiconductor seems to be the order of the day. Where does that leave TI?

TI seems to be doing all right focusing on what it knows. One thing it’s been good at is developing simple Wi-Fi chips that are ideal for use in the nascent industrial Internet, a project spearheaded by General Electric but supported …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Southern Destined for Greatness?

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By Alex Planes, The Motley Fool

SO Total Return Price Chart

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Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Southern fit the bill? Let’s look at what its recent results tell us about its potential for future gains.

What we’re looking for
The graphs you’re about to see tell Southern’s story, and we’ll be grading the quality of that story in several ways:

  • Growth: Are profits, margins, and free cash flow all increasing?
  • Valuation: Is share price growing in line with earnings per share?
  • Opportunities: Is return on equity increasing while debt to equity declines?
  • Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at Southern’s key statistics:

SO Total Return Price data by YCharts.

Passing Criteria

3-Year* Change 

Grade

Revenue growth > 30%

5%

Fail

Improving profit margin

46%

Pass

Free cash flow growth > Net income growth

106.9% vs. 43%

Pass

Improving EPS

29.6%

Pass

Stock growth (+ 15%) < EPS growth

61.8% vs. 29.6%

Fail

Source: YCharts.
*Period begins at end of Q4 2009.

SO Return on Equity data by YCharts.

Passing Criteria

3-Year* Change

Grade

Improving return on equity

10.1%

Pass

Declining debt to equity

(9.3%)

Pass

Dividend growth > 25%

12%

Fail

Free cash flow payout ratio < 50%

1,902% 

Fail

Source: YCharts.
*Period begins at end of Q4 2009.

How we got here and where we’re going
Five out of nine passing grades isn’t a bad showing, but it is a bit disturbing to see such a well-established company’s share price running away from its fundamental growth. More distressing is Southern’s unsustainably high level of dividend payouts relative to free cash flow, which has languished below earnings for many years — as you might expect for such a capital-intensive enterprise.

Southern’s in the process of transitioning toward more gas and nuclear power generation, which will understandably keep capital costs high for at least next several quarters. However, as my fellow Fool Justin Loiseau points out, Southern is hardly alone in overextending itself on dividend payments recently. Of its larger peers, only Exelon is paying out a comparatively reasonable amount of free cash flow in dividends — many utilities fell into negative free cash flow territory in 2012. Utilities have generally been a very mixed bag on a fundamental basis. Not only are they struggling to maintain positive free cash flow, but the only way anyone seems able to grow revenue is by merger, as Duke Energy and Exelon both went through the process last year.

On a more positive note, Southern is doing better than nearly every other utility (except Exelon) at reducing its debt levels relative to equity:

SO Debt to Equity Ratio Chart

SO Debt to Equity Ratio data by <a target=_blank …read more
Source: FULL ARTICLE at DailyFinance