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Join in on the discussion with other like-minded investors in our community forums. Learn about the fundamental investing methodology and participate in educational workshops in the Investing forums, stay up-to-date on StockCentral news and make suggestions to the StockCentral team in Central Square, and discuss your favorite stock or recent market news in our A-Z ticker-based forums.
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sally an
ICLUBcentral, Inc.
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| 05/17/2007 4:36 PM |
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and WIT
another indian software company |
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ICLUBcentral Software Engineer |
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Sean Pulrang
Cambridge, Massachusetts
http://www.iclub.com
ICLUBcentral
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| 06/04/2007 3:47 PM |
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Well, I'm not sure what made me pass on this before; perhaps it was late, and I was tired. Whatever the reason, this looks like an interesting stock as well. If anyone is reading this and doesn't know where I'm coming from, take a look at the INFY forum where this sort of started.
Regardless, I've attached an ssg from Toolkit here, and it's not bad. The stock is currently in the Hold range (Note that I use the 25/50/25 range on my ssgs, so if you are using 33/33/33 it may look a bit different) but there is enough fluctuation in the price range that it could drop back down into the Buy range without too much trouble.
Share and enjoy! |
 Attachment: WIT.SSG
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--
Sean Pulrang
Asst. Mgr. Tech Support Dept., ICLUBcentral Inc.
To file a support request, visit: http://www.iclub.com/support |
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armin fields
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| 06/07/2007 4:35 PM |
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Sean:
Here's how our WIT SSGs compare:
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SEAN
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ARMIN
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Future Sales Growth Est
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20.00%
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20.00%
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Future EPS Growth Est
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19.60%
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20.00%
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Hi PE
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28.0
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38.0
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Hi Price
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$32.20
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$39.90
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Lo PE
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20.0
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19.3
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Lo Price
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$4.90 (other)
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$8.10 (fcast lo)
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Upside/Downside Ratio
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1.4
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3.1
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Total Return
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15.60%
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20.7%
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Price
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$16.06
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$15.95
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SSG Date
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6-1-07
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6-5-07
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Data Source
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Hem
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S&P
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We differ substantially in terms of our Hi PEs (28.0 vs 38.0) and our Lo Prices ($4.90 vs $8.10). Unfortunately, there is no Value Line to help us evaluate our judgments. Maybe what follows will help, at least to suggest whether optimism or pessimism is warranted.
According to Morningstar’s 4-24-07 report, WIT’s research and development revenue (25% of its total revenue) is a key factor and distinguishes the company as it is considered the world's largest outsourcer for R&D work. For example, WIT helps Intel design and test chips, tests Sun Microsystems' server software, and examines Cisco's routers and switches.
Mstar called WIT’s FY 2007 a “scorcher” and raised its Fair Value estimate to $18.00. Mstar also estimates that Sales will grow by an impressive 23.4% for the next 5 years and suggests a Buy price of $13.90. WIT is “a great company to own for the long term, assuming investors can fetch a fair price.”
WIT (along with INFY) also passed Reuters’ Accelerating EPS Growth Screen which seeks to identify companies that are increasing their EPS growth rates in both the long and short term. Today, only 88 out of 8850 companies passed this screen which WIT also passed in October; for that discussion of the screen and WIT, see:
Like INFY, Take Stock’s analysis of WIT is another disappointment. On 4-29, TS showed an unacceptable 8.0% Total Return compared to the SSG criteria of 15%. On 6-5-07, with the addition Q4 and annual 2006 data, TS showed a surprising 17.2% Total Return….an inexplicable increase of more than 100%.
I posted my concerns about Take Stock in the INFY folder/forum.
Armin Fields |
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Armin Fields
check out my SSG blog at
http://arminfields.wordpress.com |
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Sean Pulrang
Cambridge, Massachusetts
http://www.iclub.com
ICLUBcentral
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| 06/08/2007 9:49 AM |
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Armin,
A couple quick questions:
1. What did you use for high and low EPS? I wasn't able to get a forecast high price of 39.9 using an average high P/E of 38 without changing the Estimated high to 1.05, which throws the estimated future eps down to 17.4
2. Did you do the ssg in Toolkit, or one of the other programs?
3. I'm also curious what you used for a ratio in the zoning. My default in TK is 25/50/25. When I put used your figures for a second copy of the stock in my TK, it comes in at the very top end of the buy range. If I change to 33/33/33, then suddenly the buy range increases by a few dollars, and things look a little more comfortable.
Also, considering how much a little bit of adjustment changes the readouts on the stock, I have to agree with the quote you found from Morningstar:
[/quote]“a great company to own for the long term, assuming investors can fetch a fair price.”[/quote] |
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Sean Pulrang
Asst. Mgr. Tech Support Dept., ICLUBcentral Inc.
To file a support request, visit: http://www.iclub.com/support |
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armin fields
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| 06/08/2007 3:47 PM |
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<<1. What did you use for high and low EPS? >>
Hi EPS = 1.05 (which came from my 20% EPS estimate and which does not change; I’m projecting from the last quarter of data); Lo EPS = 0.42 ttm
<< 2. Did you do the ssg in Toolkit, or one of the other programs? >>
TK5
<< 3. I'm also curious what you used for a ratio in the zoning.>>
25/50/25
Double-checking each other’s SSG is good. I’d attach my SSG, but suddenly I can’t export (I get run-time error message ‘339’) and I have filed a request for technical support, ticket #247194.
Armin
- What’s WIT’ Sally An?
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Armin Fields
check out my SSG blog at
http://arminfields.wordpress.com |
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Sean Pulrang
Cambridge, Massachusetts
http://www.iclub.com
ICLUBcentral
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| 06/08/2007 5:56 PM |
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Armin,
I think our data may not both be at exactly the same point. When I do the trend line from the last quarter with 20% growth, I get an estimated high EPS of 1.17. I look forward to getting your ssg file when you get the chance. I'm off Monday and Tuesday, so won't be able to look at things until Wednesday, but again, I do look forward to getting the chance to see where we might be going different.
I would close with a joke, but my WIT's at low tide right now. |
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Sean Pulrang
Asst. Mgr. Tech Support Dept., ICLUBcentral Inc.
To file a support request, visit: http://www.iclub.com/support |
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armin fields
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| 06/20/2007 8:59 PM |
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Hi Sean:
I think I’ve discovered why our SSGs did not agree: my last quarter of data was 3Q FY 2006 while yours was 4Q. That one additional quarter also meant I was not using 2006 annual data. And, I was also using NAIC/S&P data while you used StockCentral/Hemscott data.
I updated my SSG to include 4Q (along with entire year 2006) and here is another, hopefully better comparison. The asterisk besides my SSG’s price is to let you know that I changed it to agree with yours.
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Sean
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Armin-1
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Armin-2
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Take Stock
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Est Sales Gwth
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20.00%
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20.00%
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20.00%
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20.00%
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Est EPS Gwth
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19.60%
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20.00%
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20.00%
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19.57%
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Hi PE
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28.0
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38.0
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38.0
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30.0
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Hi Price
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$32.20
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$44.50
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$44.50
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$34.46
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Lo PE
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20.0
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19.3
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19.3
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13.9
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Lo Price
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$4.90 [other]
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$9.10 [fcst lo]
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$9.00 [fcst lo]
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$6.53 [fcst lo]
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UD
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1.4
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4.1
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4.0
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2.0 [imputed]
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TR
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15.6%
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23.1%
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23.2%
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17.7%
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Price
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$16.06
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$16.06 *
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$16.06*
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$15.72
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Buy Price
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$11.73
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$17.95
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$17.88
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$15.72
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SSG Date
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6-1-07
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6-15-07
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6-20-07
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6-19-07
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Download Date
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6-20-07
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6-20-07
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Last Q of data
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4Q FY 2006
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4Q FY 2006
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4Q FY 2006
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4Q FY 2006
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Last Q EPS
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$0.15
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$0.15
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$0.14
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$0.15
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Data Source
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Hemscott
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Hemscott
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S&P
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Hemscott
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I used a much higher Hi PE than you did and a much, much higher Lo Price. That’s why I got a 4.0 Upside/Downside Ratio (S&P data) or 4.1 (Hem data) while you got 1.4. You are even more conservative than Take Stock‘s Upside/Downside (1.4 vs 2.0 imputed) and Buy Price ($11.73 vs $15.72).
Do you know Take Stock’s method for determining the Lo PE (here, 13.9) which is way less than either of us used?
Irving Roth fixed my TK 5 and I have attached my updated SSG (S&P data).
Armin
ps: Sally An, what do you think; I'm at my WIT's end
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Attachment: WIT by Armin, S&P data.ITK
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Armin Fields
check out my SSG blog at
http://arminfields.wordpress.com |
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armin fields
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| 07/09/2007 11:43 PM |
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The top 100 Information Technology companies, according to Business Week, were reported in its July 2nd issue. Companies were ranked on the following criteria: Current Revenues, Revenue Growth, Current Profits, Return on Equity, and Shareholder Total Return.
The full article is at: http://www.businessweek.com/magazine/content/07_27/b4041408.htm?chan=search
Here's how the Indian IT outsourcing companies ranked:
- 23 ⎮ last year]: Tata Consultancy (TCS, traded only in India)
- 30 ⎶]: Infosys (INFY)
- 49 ⏅]: Wipro (WIT)
- 70 ⏜]: Cognizant Technology Solutions (CTSH)
- 76 [NA]: HCL Technologies (HCLT, traded only in India)
I've SSGed all but two as TCS and HCLT have no data file from BetterInvesting/S&PSDS or from Stock Central/Hemscott.
INFY and WIT look like the best of the bunch to me, and I've posted my findings in those forums/folders.
I'm inclined to buy WIT because its per share price is so much less than INFY ($16.25 vs $54.25 currently) thinking that WIT will be more likely to double in price in 5 years. Is my thinking correct, or are both stocks just as likely to double in price because of my SSG's 20%+ estimated Total Return for each one?
If the latter is correct, then how might I decide which one to buy??
Armin |
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Armin Fields
check out my SSG blog at
http://arminfields.wordpress.com |
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Joe Craig
Ellicott City, MD
StockCentral Administrator
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| 07/10/2007 2:00 PM |
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>I'm inclined to buy WIT because its per share price is so much less than INFY ($16.25 vs $54.25 currently) thinking that WIT will be more likely to double in price in 5 years. Is my thinking correct, or are both stocks just as likely to double in price because of my SSG's 20%+ estimated Total Return for each one?
Armin,
I would argue that your thinking isn't correct.
Here's my thinking ... Assume that you purchase $1000 of INFY and $1000 of WIT. Notice that I'm thinking of the cost of ownership, not the number of shares that you purchase.
Suppose that INFY splits 4 for 1. Now is INFY "cheaper" than WIT? I don't think so. They've just changed the denomination of the shares. The value of the company hasn't changed, your ownership percentage of the company hasn't changed.
Both WIT and INFY seem to be quality companies, based on the metrics that we use.
If you look at the Take Stock analyses of these two companies, it would appear that WIT is less expensive because it is in the BUY zone, not because it's share price is low. Now, I know that you don't have a lot of faith in Take Stock so I'd ask what your SSG analyses show for these companies.
If you compare the risks versus the rewards for equal dollar investments in these two companies, that might help you make a decision.
If you're using Toolkit or one of the other SSG analysis tools, take a look at the Stock Comparision Guide for the companies. Be sure to eliminate the criteria that don't have to do with growth and value. Which stacks up better? |
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Joe |
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armin fields
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| 07/13/2007 10:41 PM |
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Joe Craig wrote:
<< I would argue that your thinking isn't correct.
Here's my thinking ...
Suppose that INFY splits 4 for 1. Now is INFY "cheaper" than WIT? I don't think so. >>
Hey Joe:
While you argue that my thinking "isn't correct", I disagree with your opinion....we mean the same thing, but I'm trying to be more polite.
I think your analogy about splits is inapplicable and therefore irrelevant.
I did compare WIT and INFY on the SCG and both were very close. I suppose I should have written: all things being mostly equal, I prefer the much cheaper stock (WIT @ $16.25 vs INFY @ $54.25) as WIT seems more likely to double in 5 years.
If you or anyone has thoughts that directly address this issue, I'd sure appreciate them.
TK5's SSG and SCG do not address this as they assume, I believe, that price will follow the stock's earnings and P/E regardless of its starting price. It's remotely possible that TK5's algorithms take this issue into account when projecting the 5 yr future, but I don't think so.
<< I know that you don't have a lot of faith in Take Stock so I'd ask what your SSG analyses show for these companies.
One of the reasons I don't trust Take Stock's analysis is that it never exceeds an arbitrary 20.00% maximum EPS estimate, no matter what and no matter which stock. When I did my SSGs, ALL of the other EPS estimates for INFY and for WIT (from First Call, Zacks, Reuters, S&P and Value Line) were in excess of 20.00% (27.50% high by Reuters & 25.00% low by First Call for INFY; 25.10% high by Zacks & 23.87% low by First Call for WIT).
My SSG analyses are posted in the WIT and INFY folders/forums.
Armin
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Armin Fields
check out my SSG blog at
http://arminfields.wordpress.com |
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Joe Craig
Ellicott City, MD
StockCentral Administrator
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| 07/15/2007 12:24 AM |
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Armin,
I wasn't trying to be impolite. You asked "is my thinking correct." I replied that I thought that your thinking "isn't correct" and I tried to say why.
My point about the split simply was to point out that a stock isn't necessarily cheap nor expensive based on the dollar value of a share. Price has to be compared to things like earnings per share and that growth is best compared to something like the earnings growth rate. Price alone has absolutely nothing to do with a company's ability to grow or to grow the share value.
The Stock Selection Guide most emphatically address this issue. On the reverse side we try to make a judgment of the company's ability to grow its share price by looking at the potential for the company to grow its earnings. It absolutely follows the notion the price follows earnings and that earnings follow sales. The "algorithms", such as they are, that make up the stock selection guide use this implicitly, by using estimated growth rates and estimated P/E values to estimate the potential for share price growth.
As for Take Stock, by design doesn't make estimates that exceed 20% for the 5-year sales and earnings growth rates. That's because it's so hard for a company to exceed those growth rates for 5 years. A conservative prognosticator (and Take Stock is VERY conservative) might follow such rules.
Now, I'll grant you that there are companies that, from time to time, seem to ignore the "rules" and I'll agree that companies like WIT and INFY seem to be breaking the rules. Still, Take Stock views both of these companies to be very high quality companies. It's also true that Take Stock views both companies as over priced, i.e. not in the buy zone based on it's conservative estimates. INFY is much more overpriced (I would say more expensive) than WIT. But this is not related at all to the absolute prices of the stocks. It is relative to the buy range, and that is based on price follows earnings!
I've also looked at your analyses ... not today, but a couple of weeks ago. Your analyses are not out of line. But, they aren't as conservative as Take Stock's analyses.
Summary: these appear to be two very good companies. It's also true that everyone knows that, and that's why their share prices are "high." |
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Joe |
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