Here are Ralph Seger's comments:
Second Quarter 2007 Progress Report
The following review is based on prices as of June 29, 2007, estimated EPS by analysts for the 12 months ending June 30 2008 and Relative Value (RV) using the P/E ratios I used in my SSGs.
Amgen (AMGN), 55.29, has estimated EPS of $4.28, a P/E ratio 12.9 and RV of 62.
Uncertainty concerning the company's earnings prospects has adversely impacted the price. The U.S. Government has proposed to limit reimbursement of erythropiesis stimulators based on the nature of the underlying malady and the hemoglobin levels that trigger therapy according to Value Line. Analysts expect growth of EPS this fiscal year to be 6.7% and 4.8% next year. This is significantly below our estimate of long-term growth of 15%. It explains why the P/E ratio of 12.9 is well below the adjusted average low of 15% we have used in our SSG.
I own AMGN as does my investment club. We plan to retain our shares for the long-term.
Fastenal (FAST), 41.86, estimated EPS of $1.66, a P/E ratio of 25.2 and a RV of 81.3.
For the quarter ended March 2007 EPS rose 12.5%, sales increased 13.35% and pre tax profits improved 27.7% as margins increased from 17.9% to 20.2%. Management continues to improve efficiency. Analysts expect growth for this years fiscal period to be 15.2% and 19.1% for next year. Expansion is expected to continue. I own the stock as does my investment club. The stock is a buy.
Level 3 Communications (LLL), 97.39, estimated EPS of $6.06, a P/E ratio of 16.6 and a RV of 101.7
For the quarter ending March 2997, EPS grew 14.2%, sales increased 13.6% and pre tax profits improved 14.9% as profit margins remained unchanged. The company continues to gain new government contracts. Acquisitions activity has been above normal.
LLL is a buy despite price appreciation.
Lowe's (LOW), 30.69, estimated EPS of $2.15, a P/E ratio of 14.3 and a RV of 78.4 suggest a buy.
The downturn in the housing industry has had an adverse effect on LOW. As a result April quarterly EPS declined 8.4%, and sales crept up 2.1%. Te pre tax profits dropped 12.9% as margins declined from 11.5% a year earlier to 9.8% As long as the real estate market remains depressed we should not expect historic growth of 18% from Lowe's. As an owner of LOW and an investment club holding LOW remain optimistic for the long-term. For investors LOW is a buy. The PEG ratio is an attractive 79.3.
Quality Systems (QSII), $1.58 estimated EPS, a P/E ratio of 23.9 and a RV of 131.2 suggests the stock is over valued, but not yet a sale.
The final quarter of the fiscal year ended March 2007 saw EPS rise 10.7%, sales expand 26.9%, but pre tax profit was held to a 12.4% increase as margins declined from 35.1% to 31.1%. Trailing twelve months EPS grew 40.7% for the fiscal year. RV is 131.2 and PEG is 108.5.
NetGen Health Care Information Systems is a wholly owned subsidiary of Quality Systems. The Certification Commission for Health Care Information Technology that NetGen Health Care Information System's software meets the Commission's ambulatory electronic health record criteria for 2007.
We consider OSII as a hold in view of its elevated valuation. Analysts expect this year's growth to be 20.2% and next year's to be 23.%% |