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Thursday, October 27, 2005

more businesses

HCAR, new and used car dealerships in the Northeast (some nearby). The income story is that SG&A has steadily been driving downwards. Interest income dropped after 2001. The combination of these two made them profitable (lost money in 2000 and 2001). They ramped up the business in 1998 and took a loss that year. But otherwise they've been profitable. Some stock options. Cash flow is kind of crappy. Recent results have been very good. That's going to change with SUVs probably decreasing, interest rates going up. Depending on the stock price, this might be a short candidate. They earned 50 cents in 2004, but long term I'd price it as if they earned about 15 cents. They beat 2004 numbers in Q1 05 (on lower revenues). The stock is trading at $1.40, so the market isn't fooled by this one.
low priority pile

HEMA, It's the only for-profit blood donation company. There's a nursing shortage which makes expansion very difficult. In Southern Calif, a major company switched to 24-hour frozen plasma from 8-hour. If enough companies switch, HEMA might have to reduce prices. A new therapeutic apheresis company stole some of HEMA's employees, causing a recruiting hit and a salary hit to keep nurses from leaving.

HEMA has been restructuring, closing some centers.

Only one large 10% customer. No legal matters.

Revenues are fairly constant at around $26 million for 4 years. Gross margins declined for years, but then went back up to 21% in 2004 (restructuring). Gross margins in continuing operations increased from 7% to 17% and 22% in Q2 05. They earned 17 cents diluted in 2004. Equity took a big hit in 2003, probably due to restructuring. Unqualified audit opinion. Q2 earnings were 5 cents diluted (vs 6), 8 cents diluted for the half vs 9.

I'd expect some deterioration in earnings due to the issues above. Also some stock option dilution.

Cash flow is great. Earnings is probably fairly close to free cash flow. But cash flow in 2005 has been lower due to various balance sheet movements that would indicate a slowing business.

Balance sheet is AR, PP&E, and cash. Current ratio is about 2. Lots of equity. This only improved in Q2.Ok, so based on all of this, a rough guess of value would be $1.95. Recent stock price is $1.56.
worth following

HFIT, fitness and health management services to corporations and hospitals and universities. They bought Johnson & Johnson Health Care Systems, Inc. at the end of 2003.

Unqualified audit, with an extra paragraph about extra auditing done.Assets are mostly goodwill and AR (AR is mostly unchanged by Q2 05). The next highest is an order of magnitude lower. Yuk. And that's an intangible. Double yuk. Otherwise the balance sheet looks stable. Half equity.

25% gross margins. 6.7% operating margins. Earned 10 cents diluted (7 cents in first half 2005), but watch out for deferred tax assets. Some dilution.

Cash flow looks ok through Q2 05. Free cash flow probably matches earnings, but it's not easy to tell quickly. There's lots of stuff like amortized intangibles, deferred taxes, etc.

Quick valuation guess: $1.80. Stock price is $2.10.
worth following

HNNA, investment advisor/broker. They ran a "Dogs of the Dow" fund. Didn't Motley Fool come up with that idea? HNNA has been buying up mutual fund management companies. Revenues went way up in 2004. 50% operating margins (up from 37%). Wow. 29% net margins (up from 22%). Double wow.

Unqualified audit opinion. Balance sheet is odd, as expected for this kind of company, but it's good. $1.63 diluted earnings (vs 65 cents in 2003). Cash flow is good, as you'd expect.

Results leveled off in 2005. 93 cents earning in 9 months (vs 78 cents). Doesn't seem like a lot of dilution on quick glance.probably worth about $18 per share. Selling for $26
worth following

MKRS, It's difficult to know what the business is worth. It might be worth 10cents, maybe more. It's selling for 22 cents. But still it's...
worth watching (update: stop following)

MPAA, worth about $10 and they're selling for $10.20.
low priority pile

MPAD, they earned 55 cents, but the actualcash flow has been terrible for 4 years (was better before that). Based onearnings, they'd be worth about $7, perhaps more. They're selling for $8.00.
low priority pile

MRPT, they made money in 2004. But more importantly their website contains valuable info about other companies that I've looked at, such as Bulldog Technologies and Billy Martin's!

MEK, Moved to AMEX. Results improving dramatically in Q2, earned 7 cents. Priced for Q2. Some Katrina damage. New revolver at prime + 1.5, secured by "security agreements". Seems fully valued, but...
worth putting on the good list (update: stop following)

MTWD, overpriced based on current results, but unknown future growth is a wild card.
Worth tracking

MHCO, (plumbing & electrical supplies) seems like an OK company but priced about right. Someone "found" it in September.
worth following

MIOK, they're making a cheap GPS system, which is good, but I fear that the big
companies will duplicate what they're doing and do it even cheaper with large
worth following

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