Saturday, July 16, 2005
Burnham Holdings (BURCA)
Sales have been increasing over the last 10 years (only 2002 was a down year). Gross margins took a hit this year with the spike in materials costs. They view it as a short term effect and I would tend to agree.
25% gross margins
7% operating margins
3.8% net margins
Assets are mostly PP&E (about half depreciated), inventories, AR, other assets. Debt/euity is about 0.33. Not much in stock options. Pay out a significant dividend, increasing routinely. Cash flow is kinda ugly. Small pension liability: expected return of 8.50%, not much underfunded, this is not an issue from what I see so far.
Sales took a hit in Q1 and expenses were up. 40 cents a share loss. They're expanding a plant (consolidation move). Book value is over $20/share. Earnings average about $2.20/share. Dividends are $1.12. Stock is worth about $33. Shares are selling for $25.
Not cheap enough, but definitely worth following.
Actually, one of my brokerage accounts is set up to always refer to me as "Mr ACLN" so that I never forget: the first time in 27 years the SEC shut down a NYSE stock. I figure if you're going to screw up, do it in a big way.
One reason I make a big deal about red flags nowadays is because ACLN gave off all sorts of red flags. When I'm done looking at a stock, I step back and look for any sort of patterns in the red flags.