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Subject: Doug Gerlach's Pick: EXBD

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Doug Gerlach
Cambridge, MA
http://www.iclub.com/
President, ICLUBcentral

02/21/2007 11:39 AM
Since I'm selling TALX in advance of its acquisition, I'm switching to a new pick for the Top 25 Stocks for 2007 (and Beyond) competition -- Corporate Executive Board (EXBD). Corporate Executive Board Company provides best practices research, decision support tools and executive education focusing on corporate strategy, operations and general management issues. Best practices research supports senior executive decision making by identifying and analyzing specific management initiatives, processes and strategies that have been determined to produce the results in solving common business problems or challenges. The Company provides research and analysis to a membership of more than 2,800 of the world's corporations. For a fixed annual fee, members of each research program have access to an integrated set of services, typically including best practices research studies, executive education seminars, customized research briefs, Web-based access to the program's digital content database and decision support tools. The company's FY 2006 revenues (preliminary for the full year) were $460.6 million. Around February 9, 2007, the company announced preliminary results for the 2006 year, with revenues up 25.7% and EPS up 11.5% in the quarter. The company also said that it expects annual revenue growth of 20% for 2007, and the stock promptly plummeted 14% in price (since investors were expecting more). The stock has been valued quite highly over the past seven years, so this adjustment brought the PE ratio down to the company's 5-year average. In my stock study, I'm projecting 18% growth over the next five years. I've manually added 4th quarter preliminary data to the study, so some of it is incomplete right now, but it's enough to get a sense of the company's prospects, I think. At the 2/16/07 closing price of 77.93, the company could see a high price of nearly $160.00 in 5 years based on that 18% EPS growth. On the low price side, I set the low price at $55, roughly midway between the lowest 2 prices of the past three years. This sets the upside/downside ratio at 3.6:1 and the projected total return at 16.2%. This is an aggressive pick, since there is some uncertainty about the company's near-term prospects. But their history shows plenty of consistency, and long-term holders may benefit from the current buying opportunity even as growth slows as the company gets larger. Attached is my *.SSG file for your perusal. DG
Attachment: EXBD.SSG
Posting from ICLUBcentral world headquarters in the Harvard Square's historic College House, Cambridge, MA

armin fields

02/22/2007 10:19 PM
*<< I set the low price at $55, roughly midway between the lowest 2 prices of the past three years. This sets the upside/downside ratio at 3.6:1 and the projected total return at 16.2%. >>* - If you had used the low price option often thought most appropriate for growth companies, $34.90 from SSG Section 4B(a), the upside/downside ratio would have been 1.9 and your SSG would have been a “don’t buy”. Why do you think $55 is a more appropriate low price than $34.90 or than $48.40, the average low price for the last 5 years? *<< This is an aggressive pick….>>* - Value Line reports 100% Price Growth Persistence which, according to VL, indicates the stock is a favorite of momentum players. The 14% price decline on solid earnings growth also suggests that investors see EXBD as a momentum play. Would you have “bought” EXBD for your contest portfolio if it had not been a SSG Buy? Armin Fields

Armin Fields check out my SSG blog at http://arminfields.wordpress.com

Doug Gerlach
Cambridge, MA
http://www.iclub.com/
President, ICLUBcentral

02/22/2007 11:04 PM
Posted By armin fields on 02/22/2007 10:19 PM - If you had used the low price option often thought most appropriate for growth companies, $34.90 from SSG Section 4B(a), the upside/downside ratio would have been 1.9 and your SSG would have been a “don’t buy”. Why do you think $55 is a more appropriate low price than $34.90 or than $48.40, the average low price for the last 5 years? *<< This is an aggressive pick….>>* - Value Line reports 100% Price Growth Persistence which, according to VL, indicates the stock is a favorite of momentum players. The 14% price decline on solid earnings growth also suggests that investors see EXBD as a momentum play. Would you have “bought” EXBD for your contest portfolio if it had not been a SSG Buy? Unfortunately, I don't have the luxury of sitting on cash in the contest, so I chose to go with a stock that's got much higher signature PEs than many people would prefer. Even now, the stock is at its average PE ratio, so the question is how low will it go? The stock has already been beaten up, and may be in the transition from a momentum stock to a growth stock, so the stock would have to fall roughly a third in price to reach $55, which seems like a lot (though of course anything is possible). Doug

Posting from ICLUBcentral world headquarters in the Harvard Square's historic College House, Cambridge, MA

Rajiv Roy

02/25/2007 10:57 PM
And here is an online version of EXBD http://www.stockfundas.com/home.aspx?cmd=cmdRcvTckAnl&frmUsrId=3&tckId=2353

Rajiv www.stockfundas.com

Kenneth Peters
Merritt Island
www.naicspace.org

04/06/2007 10:25 AM
Just now looked at Doug's EXBD.ssg in Toolkit and am curious as to why the Judgment Audit said, "You can't count on earnings to grow at a faster rate than sales over the long term." Doug used 18% for both Sales and Earnings estimated growth figures.

Ken

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Forums > Stocks with tickers beginning E-K > EXBD > Doug Gerlach's Pick: EXBD

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