This time, I'm looking at American Reprographics (IRP).

Keystrokes will be shown as ((Alt)) + ((letter)), where that applies. Uniform Resource Indicators or Locators (URLs) will be given completely where possible; if not, the http:// is implied. Acronyms are explained the first time they're used. The usual disclaimer applies. This is a discussion for learning only; no recommendations for investment are implied or intended. You make your own decisions. I'm doing this to learn how to use the tools intelligently, and appreciate any constructive feedback.

Why this stock? It showed up as a recommendation in one of the Motley Fool conferences.

What do they do? According to the info on Microsoft's service, ARP provides business-to-business reprographics services, primarily to the architectural, engineering and construction industry. They do document management, distribution, logistics, and print-on-demand, both at the customers' sites and at their own locations. (http://moneycentral.msn.com/investor/home.asp),

Now I checked the listing on Reuters, and selected the Ratios link to take a quick look comparing it to the rest of its industry. The P/E ratios are running about half that of the industry, but it is normally very near that of the industry. Price to sales and to book are both lower than the industry. It shows 87% owned by institutions, a bit higher than recommended for the SSG approach. Their sales and earnings per share (EPS) are normally higher than the industry. The gross margin is just about industry's, and the pre-tax profit margins (PTP) run about that of the industry. The quick and current ratios are a bit lower than the industry. The return on assets (ROA), investment (ROI) and equity (ROE) are all higher than the industry. Debt to equity seems high at about 1.5.

Let's turn to the Microsoft Research Wizard and get some background. The company's sales and earnings growth are lagging the industry – not a good indicator.

How has the market treated that sector recently? The industry doesn't seem to have dropped as much as ARP has. Therefore, we should look into it carefully: what do they know that we do not yet.

Pulling up the SSG, and taking a look at the Side 1, a quick look at the “visual analysis” portion (the graph) shows only five years' worth of data (which is why TakeStock rejects it as too young). The pattern is not bad, but growth is shown at about 8 – 10%, rather flat for a small company. EPS and PTP for the last three quarters are “rounding off” and flattening, indicating they are servicing debt, it would appear. Barbed-wire fence #1: Fair, but keep digging.

We see year-over-year figures (Recent Quarterly Figures) that are positive, but EPS is flat. Barbed-wire fence #2: While the year-over-year figures are positive, there's a caution thrown with a zero growth in EPS..

Pulling the Value Line sheet, we can fill in some data: Insider ownership is 19%, good.

The price is near a 52-week low.

Looking at the estimated growth rates for sales and EPS, analysts are estimating 15% growth for EPS. Sales historical growth is 15%, and EPS at about 25%. I clicked the background of the image and brought up the adjustment window, then Viewed Historical Growth. While there, I checked the r-squared (or predictability) values for sales and EPS growth, which were 0.86 and 0.72, indicating fairly predictable sales growth, but lower than desired predictability for EPS. I estimated 8% growth to be conservative.

Just for grins, using the ((Alt))+((R)) keystroke to bring up the “preferred procedure” as a sanity check, I see -0.3% compound annual growth rate (CAGR) for EPS. At least one investment club refuses to use “preferred procedure” figures as they found them less predictive than “recent five years” figures. Countervailing advice is to avoid any company with a negative preferred procedure CAGR.

A quick check of the “sustainable growth rate” with ((Alt))+((S)) shows a purported “sustainable” growth rate of 51%. That seems far too high, so we'll continue with 8% estimated for sales and EPS CAGR.

So, conclusion from Side 1: Caution. Keep looking if you wish. Speculative.

Side 2:

A quick look at Section 2 of the SSG shows lines A (up) and B (down), a bad sign. Using ((Alt))+((R)) we can change the ROE to use end of the year figures, and see only one year's growth. At this point, following the SSG strictly, the recommendation would be to “move on; too speculative.” Just for the exercise, I'll keep going.

Using ((Alt))+((D)) we can check the debt-to-equity level on the company, and it is going down, a good sign, but only two years' data, a bad sign.

Looking at Section 3, we see a P/E ratio calculated at a default of about 29 high and 16 low. But again, there's only two years' data.

We can check Line 4A's figures by clicking on the green box. The historical figures are shown, and are very sparse. No sense in changing the figures with so little data.

Now, what “low price” to use? Well, recently the stock has been near its low, and hit a low of 13. I selected the (a) as the “forecast low price”. Then I checked “other” and used ((Alt)) + ((R)) to find the “rational” price. That “rational” price was much higher than the current price, but there's little data to work with. The guidance is to select a “low” no higher than the 52-week low. Therefore, we need to select something below what it is today as a “conservative” estimate. I selected 10, as a “low price” it could get down to, to start the work with.

That gives an U/D ratio of 9, which seems too high. Additionally, the PEG is at 124, which seems to indicate an optimistic estimate. The relative value is at about 47%, suggesting that, yet again, there's something we don't know.

A quick look at the projected average return and the estimated total return has returns in the 25% to 32% levels.

The “conventional wisdom” is that the worse a company is performing, the better it appears on Side 2, and this looks pretty darned good on very sparse data.

Conclusions for now: Too speculative at the moment, even though it's a size to recommend for potential growth.

The usual disclaimer applies. This is a discussion for learning only; no recommendations for investment are implied or intended. You make your own decisions and really should do your own research. I'm doing this to learn how to use the tools intelligently, and appreciate any constructive feedback.