The first of a series of trade setups I will be posting…
My scan of the S&P 500 stocks looking for good risk to reward trades involves me using the grid feature in Prophet Charts (also part of Think or Swim trading platform which I use myself). One of the most important rules when looking at [...]
This post is part of a series featuring bargain stocks that are worth a look now. See more Cheap Stocks.
In addition to being a crackerjack equities analyst, I'm also something of a makeup aficionado. Credit my upbringing for this; my mother grew up in the '50s, and even today, she is loathe to so much as check the mail without a full application of liquid eyeliner. So, as you might imagine, I'm quite familiar with Estee Lauder Companies (NYSE: EL).
While it's technically a consumer-goods company, you might have a perception of Estee Lauder as a peddler of upscale cosmetics -- in today's economy, high-priced eyeshadow is unarguably a discretionary expense worth cutting. However, EL's reach is probably broader than you realize. For example, the company owns MAC, a line that caters specifically to professional makeup artists and amateur makeup fetishists. No matter the economic climates, these two constituencies can be counted on to keep shelling out for blush.
Estee Lauder also boasts the lower-priced Clinique line, a staple of many women's' skin-care and cosmetics routines for decades. On the high end, the company sells fragrances by the likes of Tom Ford and Michael Kors -- two names favored by the kind of consumers who do still have disposable income to spare. Plus, its Bumble and bumble brand name is a favorite of professional hair stylists.
Ah, my old buddy Revlon, Inc (NYSE: REV)! Actually, that exclamatory statement is full of sarcasm. Revlon, a beauty-products business whose colleagues include Avon Products, Inc. (NYSE: AVP) and The Estee Lauder Companies Inc. (NYSE: EL), is not a buddy of mine. It is a stock that I really have no intention of buying. The company isn't exactly the most attractive one out there at the moment in terms of fundamentals, but it did have a decent cash-flow statement in the third quarter. Let's check out some numbers.
To begin with, revenues didn't see much growth, as they rose about 1%. Reported net income was $0.57 per diluted share versus a net loss of $0.20 per diluted share in the year-ago period. Unfortunately, that doesn't tell the whole tale. You have to strip out a one-time gain from discontinued operations to get the full story. And you're not going to like it once you do. So, the loss from continuing operations becomes $0.30 per diluted share, which was $0.06 wider than the loss in Q3 2007. Yet, the cash-flow statement does offer a bright spot. Positive operational cash flow of almost $44 million was booked over the last nine months. Last year, Revlon used almost $50 million to fund operations over the nine-month period. Some changes in working capital helped out.
Well, even with the better cash-flow scenario, no, I'm not buying the stock. Revlon is still, in my opinion, a long way off from becoming a great investment idea. I'll need to see more robust growth in the top line and a better profit picture. Sure, for the nine-month period, Revlon did generate a profit of $0.04 per diluted share, but I'm still not convinced. As of this writing, the stock was down 23%. I know it's a bad day in the markets and all, but I wouldn't want to align myself with a company that sees that kind of reaction to earnings. Such a pullback doesn't scream value to me when it comes to Revlon.
Disclosure: I don't own any company mentioned; positions can change at any time.
Hello Friends! thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website. I thought a picture of a rollercoaster, this one of the Colossos from Germany, might best describe my own feelings of the market as euphoria alternates with depression in[More...]
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