Stryker (SYK): Looking Strong and Solid

 

Stryker Corp (SYK) is a major manufacturer of orthopedic implants (60% of 2007 sales) and medical-surgical equipment.  It has a remarkable record of EPS growth: over the past 30 years, the company’s EPS has increased by at least 20% in all but one year (1999, due to an acquisition) according to Value Line.  When I use S&P data, its EPS has averaged nearly 26% per year over the last 10 years.  However, growth has declined in the last 3 years to around 18% annually and Sales growth has also slowed to 11-12% during the same time. 

 

Despite the downtrend, the company’s Pre-Tax Profit Margin is trending up, a positive development, going from around 18% five years ago to 23% in 2007 (for a five-year average of about 21%).  According to Reuters.com, Stryker’s PTPM is almost twice as large as its industry average.  Moreover, SYK has virtually no debt, some $17.7M which is only .3% of Total Capital.

 

Morningstar especially likes the company’s “top-tier” position in the orthopedic implant market, particularly with regard to knees and trauma as well as spine products and SYK plans to launch two artificial spinal discs by 2010.  Its hip segment hasn’t done as well, primarily because of a product recall in early 2008.  The FDA sent a stern six-page warning letter in January ordering SYK to fix a host of long-standing manufacturing problems with its hip replacement parts.

 

The Investment Advisory Service chose Stryker as one of its featured stocks in July.  IAS is a pay service by investment professionals who use the SSG to analyze stocks.  Ann Cuneaz, Better Investing’s Education Program Manager, also recently SSGed Stryker.  Her analysis is available on the First Cut page of the BI website.

 

Here is a comparison of the SSG by IAS, Ann, myself and Take Stock.  Take Stock is a computerized program that is designed to produce a conservative result without input from the user.  I did two SSGs, one with S&P data and the other with Hemscott data, but both with the same judgments.

 

Stryker   Corp (SYK)	IAS	Ann Cuneaz		Armin-1	Armin-2	Take Stock
Date	6-16-08	6-26-08		6-27-08	6-27-08	6-27-08
Data	S&P	S&P		S&P	Hemscott	Hemscott
Price	$64.54	$62.00		$62.26	Same	$62.54
Sales Growth	13.00%	12.00%		12.00%	Same	10.90%
EPS Growth	17.00%	12.00%		15.00%	Same	08.71%
Forecast High PE	30.0	28.0		27.7 (2006 low)	26.7 (2006 low)	30.0
Forecast High Price	$157.80 (8.8% > VL)	$124.30		$140.40	$135.10	$109.26
Value Line Estimated High Price = $110-145 on 2-25-08 and 5-30-08
Forecast Low PE	20.0	18.0		19.7 (2006 low)	20.3 (2006 low)	20.6
Forecast Low Price	$48.00 (Low PE x Low EPS)	$45.40 (Low PE x Low EPS)		$49.60 (Low PE x Low EPS)	$51.50 (Low PE x Low EPS	$50.68
Upside/Down	5.6	3.8		6.2	6.6	3.9 (imputed)
Total Return	19.9%	15.4%		17.9%	17.0%	12.6%
A SSG Buy at	$75.45	N/A		$70.53	$67.84	$55.59
Rel Value & Projected RV	89.9% & 78.1%	84.8% & 75.7%		85.2% & 74.1%	85.8% & 74.3%	N/A
Quality	S&P = B +	N/A		S&P = A+	No Rating	TS = 6.3, acceptable
PTPM – 5 yr ave	19.1% Trend up		20.7% Trend up	20.7% Trend up	19.1% Trend up	21.0% Trend N/A
ROE – 5 yr ave End Equity	20.4% Trend down		20.3% Trend down	20.3% Trend down	20.1% Trend down	N/A
ROE -5 yr ave Start Equity	26.1% Trend down		N/A	26.1% Trend down	25.8% Trend down	25.8% Trend N/A
Debt : Equity 5 yr ave	-0- Trend even		N/A	1.3% Trend down	1.3% Trend down	N/A

 

- Morningstar recently raised its Sales Growth estimate for SYK from 12 to 13% for the next 5 years.  Zacks is also estimating 13.45% Sales Growth for the next 5 years.  IAS, Ann and I were all near these estimates.

 

- When I did my SSG, six sets of analysts were closely estimating long-term EPS at around 18-18.50% with Value Line low at 17.50% and First Call high at 20.00%.  S&P was 18.50%, Reuters via Morningstar was 18.70%, Zacks was 18.88%, and First Call was 19.00%.  First Call’s seven estimates ranged from a low of 13.00% to a high of 20.00%; at Zacks, the eight estimates ranged from a low of 15.00% to a high of 20.00%.

 

- I use comparisons to assess what I think is reasonable and I do not rely on my gut feelings (or how well I sleep at night). The analyst estimates ranged from 13.0% to 20.0% and anything within that range I define as acceptable.  For SYK, more than 20.0% seems too high and less than 13.0% seems too low.

 

- My 15.00% EPS estimate is 5.00% lower than the highest estimate (First Call) and 2.50% lower than the lowest (Value Line).  More importantly to me, now that Reuters.com has stopped reporting the Standard Deviation of its analyst estimates, is that my Forecast High Price is squarely within Value Line’s High Price estimate.  This combination tells me that my judgments are reasonably conservative, not too high and not too low.

 

- Take Stock’s EPS estimate seems unreasonably low at 8.71%, nearly 9.0% below the lowest estimate which was VL at 17.50%.  It’s no surprise, then, that Take Stock is the only analysis that did not result in a SSG Buy with a 12.6% Total Return (15% minimum required). 

 

- Take Stock gave Stryker a Quality Rating of 6.3: a minimum of 3.4 is required to pass muster, 6.7 is desired and 10.0 is the maximum.  In contrast, S&P gave Stryker an A+ for Quality, its highest of 8 ratings.

 

- IAS explicitly said it was using conservative judgments: 30 for its Forecast High PE instead of 34, the average High PE for the past 5 years, and 20 for its Forecast Low PE instead of the 24.3 average Low PE.  IAS also said its 17.0% estimated EPS was conservative compared to the 20.0% that the analysts were estimating, but I found 20.0% by only the very highest analyst at First Call.  Still, IAS’s estimate of 17.0% is less than the 18.0-18.5% consensus I discovered.

 

- However, IAS’s so-called conservative judgments produced a Forecast High Price that was almost 9% higher than the high end of Value Line’s Estimated High Price.  That’s high, but not outrageously or unreasonably high, but neither is it conservative.

 

- Ann said her 12.0% EPS estimate was “validated” by her Preferred Procedure (PP), but when I used her judgments in my PP, I got 13.9% which was closer to my 15.0% estimate than to her 12.0%.  If Ann had used 13.9%, her SSG would have resulted in 5.7 Upside/Downside Ratio (instead of her 3.8 U/D) and a 16.8% Total Return (instead of 15.4%).  I don’t understand the point of using the PP only to ignore it and then arbitrarily lower the EPS estimate by an unsupported amount.

 

-  The PP involves making four estimates for the next 5 years: Sales Growth, Pre-Tax Profit Margin, Tax Rate and Shares Outstanding.  I don’t use the PP because it involves too many estimates and too much guesswork for me.  For example, the default PP with my 12% Sales growth estimate results in 9.5% EPS growth; with VL’s estimated Shares Outstanding and estimated Tax Rate, it increases to 13.1%; and when I also use the last three year average for PTPM (instead of the default’s last 5 year average), I get 14.3%.  So, which is more fitting: 9.5%, 13.1%, or 14.3%?

 

- My “preferred procedure” <joke> is to survey all the analyst EPS estimates and decide what is reasonably conservative: not too high and not too low.

 

- Three different methods were used to decide the Forecast High and Low PEs.  IAS limited its forecast to a pre-determined maximum (30.0 High PE and 20.0 Low) which no stock, no matter what, could exceed; Ann chose SYK’s lowest PEs in the last 10 years (28.0 High and 18.0 Low); and I picked the lowest PEs in the last 5 years (27.7 High and 19.7 Low).

 

- SYK’s direct competitors (not industry peers) are Medtronics (MDT), Zimmer Holdings (ZMH), and DePuy, a subsidiary of JNJ.  The Online SSG at the BI website now allows users to pick up to three peer companies, but provides no advice on which companies are peers nor does it define the peer group.

 

Armin

Gambling on Garmin (GRMN)

Garmin Limited (GRMN), a well-known maker of Global Positioning Systems, was a featured stock in the June 2008 newsletter of the Investment Advisory Service. IAS is a pay service by investment professionals who use the SSG to analyze stocks. GRMN was also featured as the Undervalued Stock in the May 2008 issue of Better Investing magazine.

According to IAS, Garmin had a fantastic 2007 with sales up 79%, EPS up 66%, and GPS units shipped up a whopping 146%. Its automotive-mobile segment accounted for 74% of GPS sales and was up 115% over 2006, outdoor-fitness was 10.7% of sales with 19% growth, marine was 6.4% of sales with 22% growth, and aviation GPS accounted for 9.3% of sales with 26.6% growth in 2007.

Incredibly, Garmin has steadily increased its all-ready high growth in each of the last 4 years, with Sales growing from 53.3% to 79.3%, and EPS up from 49.6% to 65.6%. Garmin shows a rare picture of growth on SSG Section 1, with steeply rising Sales and EPS in an upward concave (ever-increasing) pattern unlike most growth companies which show declining growth as they age.

In spite of this outstanding record of performance, Garmin’s stock price has plummeted. After reaching an all-time high of $125.68 per share in October 2007, GRMN is now selling at $47.73, near its 52 week low. IAS noted that investor interest has cooled due to concerns about GPS market growth, unit pricing, and competition. First quarter results were especially troubling, with EPS growth up only 4.7% with S&P data (5.6% with Hemscott data). The gamble with Garmin is when will it double in price if you bought it now: in one, three, five, or more years?

GRMN’s long-term future looks solid to IAS. Component costs continue to decline making GPS units more affordable; IAS thought GRMN’s GPS would prove superior to competition from cell phone makers (as did the Better Investing article); and sales at GRMN’s main competitor, TomTom, a privately held European company, fell about 11% in the first quarter while GRMN gained market share in Europe.

Neither IAS nor BI discussed possible drivers of future growth. The company’s 2007 Annual Report discusses several upcoming plans for 2008 including: speech recognition (e.g., “find the nearest Italian restaurant”); more sophisticated mapping with 3-D perspective; and ‘Novifone’, GRMN’s entry into the cell phone market that will have GPS, a web browser, MP-3 player, and camera(s). Garmin also plans to open a new warehouse in the U.S. that will double square footage and, in 2007, bought a new factory in Taiwan that increased its manufacturing capacity by 30%.

GRMN’s upcoming Novifone could be (maybe, just maybe) a “killer ap”, improving on the Apple IPhone by adding GPS and other features. However, it will cost more, both to purchase and in monthly subscription fees as AT&T will require a two-year contract for the phone service and an extra $15 per month for the GPS.

Another driver of growth, according to a thorough article on Garmin at wikinvest.com, is that only 3% of the cars currently on the road in North America and Western Europe had in–dash GPS and only 10% of the new cars in those markets are projected to come with pre-installed GPS.

Garmin Ltd. was incorporated in the Cayman Islands in 2000 as a holding company of Garmin Corp., a Taiwanese corporation, in order to sell shares in the U.S. I’m always suspicious of companies that incorporate outside the U.S. in order to avoid U.S. taxes. Garmin also gets tax breaks from Taiwan for having its factories there. GRMN’s tax rate has steadily declined from 25.0% in 2000 to 12.6% in 2007 according to Value Line and VL also estimates a 12.0% tax rate in the next 3-5 years. However, IAS notes there was a recent change in Taiwan’s tax law that adversely affected GRMN.

Here is a comparison of their SSG with my SSG and with Take Stock which is a computerized program designed to produce a conservative result. As many of you know, I usually think Take Stock is too conservative and therefore unreliable.

I did two SSGs, one with S&P data from the Better Investing website and the other with Hemscott data from the Stock Central website, but with the same judgments for both.

Garmin (GRMN)	IAS	Armin – 1	Armin – 2	Take Stock
Data	Hemscott	Hemscott	S&P	Hemscott
Date	5-5-08	5-24-08	Same	5-24-08
Current Price	$42.11	$47.73	Same	$47.73
Still a SSG Buy at:	$60.82	$49.81	$49.27	$93.22
Garmin 52 week High and Low Price = $125.68 and $39.75
Sales Growth Estimate	15.00%	07.00%	Same	20.00%
EPS Growth Estimate	15.00%	07.00%	Same	20.00%
Forecast High PE	20.0	20.0	Same	22.6
Forecast High Price	$156.40 (30% > VL)	$110.00	$110.00	$218.75  (82% > VL)
Estimated Value Line High Price in next 3-5 yrs = $80-120 as of 4-11-08
Forecast  Low PE	10.0	9.6	Same	13.1
Forecast  Low Price	$29.00          (Recent Severe Low)	$29.00          (Recent Severe Low)	$29.80         (Same)	$51.48
Upside/ Down	8.7	3.5	3.3	Impossible to Calculate
Total Return	31.2%	19.9%	19.4%	37.2%
PTPM – 5 yr ave	34.7% Trend down	34.7% Trend down	Same	34.7%    Trend N/A
ROE – 5 yr ave with   End Equity	28.1%  Trend up	28.1% Trend up	Same	N/A
ROE – 5 yr ave with Begin Equity	37.5% Trend up	37.5% Trend up	Same	37.5%    Trend N/A
Debt to Equity	-0- Trend even	-0- Trend even	Same	N/A
Quality	Hemscott = None	Same	S&P =    Not Rated	Take Stock = 3.2, not acceptable

Discussion:

- GRMN’s share price reached an all-time high of $125.68 in 2007 and is now trading near its 52-week low at $47.73. This means that just about any SSG will result in BUY signals (Upside/Downside Ratio > 3.0 and Total Return > 15%). It also means that estimating the future is even more of a guess than usual since forecasting the future is especially uncertain when trends are going down.

- When I did my SSGs, the analysts were estimating long-term EPS at around 18-20% with Value Line high at 23.00% and First Call low at 17.50%. Zacks was 17.94%, FactSet CallStreet 18.00%, and S&P was 20.00%. Sadly, Reuters has stopped making long-term estimates.

- Usually, a downtrend in the SSG’s Pre-Tax Profit Margin or Return on Equity is a negative, red-flag warning sign. Here, Garmin’s PTPM downtrend is the primary reason why Take Stock gives GRMN a low rating for Quality. However, GRMN’s PTPM (and ROE) is way, way superior to its Industry Average so that the downtrend is not troubling, at least not at this time. At MSN Money, for example, Garmin’s 5 year average PTPM is 33.2% compared to it industry average of 6.6% where GRMN is tops out of 97 companies in the Scientific and Technical Instrument Industry.

- However, sinking margins could become a problem. GRMN’s Pre-Tax Profit Margin has declined from 39.4% in 2003 to 30.8% in 2007 and Wikinvest says that other makers of electronics (like Sony and LG) have begun to introduce GPS devices. And, Nokia just outbid Garmin for NAVTEQ, the largest GPS map maker in the U.S., which should improve NOK’s GPS and increase its competition.

- Take Stock doesn’t use the Upside/Downside concept and it is impossible to calculate for GRMN because its current price ($47.73) is lower than Take Stock’s Forecast Low Price ($51.48).…which is a SSG no-no.

- Here, Take Stock is unusually and incredibly optimistic with a 20% EPS estimate that is much higher than IAS and as high as the highest analyst’s estimate; with a Forecast High Price that is 82% or $98.75 per share greater than Value Line’s estimate; and with a $93.22 SSG Buy Price that is a whopping 96% greater than GRMN’s current price. This rosy assessment is likely to change as soon as GRMN shows some further performance deterioration, particularly sales and/or EPS.

- Armin

 

Investigating Infosys (INFY)

This month, the Investment Advisory Service chose Infosys (INFY) as one of its three featured stocks. IAS is a pay service from ICLUB Central that provides subscribers with three completed SSGs and commentary each month that are prepared by professional money managers using NAIC/BI methods.

Infosys is a well-respected Information Technology outsourcer that is based in India where salaries are lower than in the U.S. and where there are many college graduates who speak English as well as other languages. The company just announced that its Sales rose 37% and EPS rose 33% during its recently completed quarter, but the related news says that its stock price declined 7% on the day of announcement.

INFY’s Pre-Tax Profit Margin and Return on Equity (last annual as well as 5-yr average) exceed industry averages at Reuters (Software & Programming Industry, 493 companies) and at MSN Money (Technical & System Software Industry, 33 companies). At MSN, INFY is the highest on both 5-yr measures.

Most analysts are estimating EPS around 24-25% for the next 5 years with Value Line low at 22.50% and Reuters high at 25.80%. FactSet, First Call and S&P are all estimating 25.00% exactly, and Zacks is close at 24.44%. Reuters less one Standard Deviation is 21.61% (25.80 – 4.19) and is the approach I use most often.

IAS estimated Sales and EPS growth at 20.00% each, considerably less than the other analysts, and High and Low PEs at 30.0 and 20.0. IAS explicitly mentioned that it was limiting its High PE to a maximum of 30.0 and I think it also limited its EPS Growth to 20.0% maximum, just like Take Stock does.

I’m not a fan of imposing arbitrary limits on SSG analyses as that treats all high growth stocks alike. INFY’s 5-year historic Sales and EPS growth rates were a whopping 40+% according to S&P. Value Line, whose 5 year EPS estimate is the lowest of all analysts, is still 2.50% more than IAS. Even Reuters less one Standard Deviation at 21.61% is more than the 20.00% ceiling imposed by IAS and Take Stock.

FOOD FOR THOUGHT:

Still, even with its arbitrary limits, IAS’s analysis on 9-12-07 resulted in a SSG Buy with a 3.8 Upside/Downside Ratio and a 19.8% Total Return.

With regard to the Forecast Low EPS, SSGers have a key decision to make: either use the default value which is the last fiscal year of EPS or use the last 4 quarters of EPS (the Alt-Q option in Toolkit 5). I was surprised that IAS used the default value of $1.50 instead of Alt-Q value which was $1.64 when its original SSG was completed.

The difference between the two values became even larger after I updated IAS’s SSG on 10-19-07: now, another quarter of data has been added and the Alt-Q value became $1.77. As a result, the Upside/Downside Ratio was 4.7 whereas it would have been 3.4 after updating but without Alt-Q.

Like IAS, Take Stock limited its EPS growth to 20.00% and its Hi PE to 30.0. However, unlike IAS, Take Stock used 15.2 for its Low PE which resulted in a 2.7 Upside/Downside Ratio and that does not satisfy the SSG Buy criteria. For comparison purposes, I had to calculate the U/D as Take Stock does not use that concept.

I estimated EPS growth at 19.00% and also used Alt-Q for the Low EPS. My SSG resulted in a 3.7 Upside/Downside Ratio and a 20.3% Total Return. Moreover, I would be comfortable estimating EPS growth up to 21.00% as that would lead to a Forecast High Price that did not exceed Value Line’s estimated High Price which I use as one indicator of reasonableness.

(1) Is INFY a solid SSG Buy with a 3.7-4.7 U/D, or a not-close-to-a-SSG-Buy with a 2.7 U/D (according to Take Stock)?  

(2) Are there any good reasons NOT to use the last 4 quarters of EPS (Alt-Q) as the Forecast Low EPS, either with regard to INFY or with most growth stocks most of the time?    

Infosys (INFY)	IAS original	IAS up-dated & modified *	Take Stock	ArminF
Estimated Sales	20.00%	Same	20.00%	21.00%
Estimated EPS	20.00%	Same	20.00%	19.00%
Forecast High PE	30.0	Same	30.0	28.0
Forecast High EPS	$3.73	Same	$3.73	$4.22
Foreceast High Price	$111.90	Same	$111.90	$118.20
Forecast Low PE	20.0	Same	15.2	16.8
Forecast Low EPS	$1.50	$1.77 (Alt-Q)	$1.64	$1.77 (Alt-Q)
Forecast Low Price	$30.00	$35.40	$24.93	$29.70
Up/Down Ratio	3.8	4.7	2.2 (imputed)	3.7
Total Return	19.8%	19.0%	18.9%	20.3%
Date	9-12	10-19	10-19	10-19
Price	$47.01	$48.72	$48.72	$48.72
Data	S&P	Same	Hemscott	S&P

  * This reflects a price and data update of IAS’s original SSG, and Alt-Q was used, the last 4 quarters of EPS, for the low EPS instead of EPS for 2006, the last full year. In other words, $1.77 instead of $1.50.

 

 

- Armin

 

Analyzing Amgen (AMGN)

The key issue in SSGing Amgen, a prominent biotech company, is estimating what its Hi & Lo PEs are likely to be in the next 5 years. AMGN’s PEs have been trending down for the last 5 years, Hi PEs from 75.9 in 2000 to 28.7 in 2005 and Lo PEs from 47.2 in 2000 to 18.5 Lo in 2005. It is difficult to predict whether these PEs will continue to go down and, if so, to what extent. Yet, the SSG requires that we make a projection.

The SSG’s future valuation along with projected risk and reward are all based on estimating Hi and Lo PEs for the next 5 years. Hi PE is the High Price for the year multiplied by the EPS for the year and the Lo PE is the Low Price for the year times the EPS for the year.

Here are AMGN’s historic PEs for the last 10 years:

……………………Hi PE……Lo PE

1996………………27.5…….26.5
1997………………25.7…….16.6
1998………………33.6…….14.4
1999………………67.1…….25.9
2000………………75.9…….47.2
2001………………63.6…….38.5
2002………………48.0…….23.4
2003………………43.1…….28.6
2004………………30.0…….23.3
2005………………28.7…….18.5

last 5 yr ave……..42.7…….26.5
10 yr ave…………44.3…….25.8
2004-05 ave……..29.4…….20.9
5 highest out…….29.1…….18.8 **
2005………………28.7…….18.7

** This is usually the most conservative option of the SSG software, certainly when PEs are trending up, and it is often called Alt-M after its keyboard command.

Here are three SSGs of AMGN, two I did with different PE assumptions:

…………………………IAS…………Armin-1……Armin-2

Est Sales Growth…….18.00%…….12.50%…..same
Est EPS Growth………20.00%…….11.40%…..same
Est Hi PE………………33.5………..28.7……….25.0
Est Hi Price………$278.40……$156.70…..$136.50
Est Lo PE………………20.0………..18.5……….16.1
Est Lo Price……………$48.10……..$52.00……$51.20
Reward/Risk (U/D)…..11.6…………6.7………..5.0
Total Return (TR)…….33.2%………19.0%……15.8%
Current Price………….$65.45………$65.53…..same
SSG Date………………7-21-06…….7-5-06……same

The NAIC criteria to buy any growth stock is a minimum Upside/Downside (U/D) of 3.0 AND a mimimum Total Return (TR) of 15% compound annually (including dividends) per year for the next 5 years.

IAS is the Investor Advisor Service, a pay service by professional brokers-analysts published by IClubCentral (www.iclub.com/IAS) which offered a free three month trial for June, July and August 2006.

ANALYSIS:

- Value Line estimated a future High Price in the next 3 to 5 years for AMGN of $85-130 on 6-23-06 when its recent price was $67.35. The IAS estimated High Price of $278.40 is 114% or $148.40 per share greater than VL’s estimate. WOW!! One of my few rules of thumb is never to substantially exceed VL’s estimate without a good reason. IAS provided no reason at all and may not have checked VL;

- IAS used 33.5 as its estimated Hi PE which it says was AMGN’s historic average for 2003-2005 after outliers were eliminated (2001 Hi and Lo PEs, and 2002’s Hi PE were deemed atypical….or outliers in SSG-speak…and eliminated from consideration). IAS’s 33.5 estimated Hi PE led directly to its super-high estimated High Price of $278.40 and whopping 33.2% TR;

- IAS’s 33.5 is higher than the last three Hi PE options listed above: 29.4 that results from 3 outliers, 29.1 from Alt-M, and 28.7 from 2005. IAS’s narrative does not mention the trend of declining PEs and only says that it used AMGN’s historic Hi PE and that it arbitrarily reduced the expected Lo PE to 20. No reasons or explanations were set forth;

- I used a Hi PE of 28.7 (from 2005, the lowest of all the choices listed above) in my first SSG scenario. I got an estimated High Price of $156.70 which was 21% or $26.70 per share greater than Value Line’s estimate. I don’t have a good reason to exceed VL by that much as I have not read the company’s annual report(s) nor done any digging into what’s going on with its declining PEs;

- I used a Hi PE of 25 in second SSG scenario and got an estimated High Price of $136.50 which is only $6.50 or 5.0% greater than VL’s estimate. It’s noteworthy that this analysis still satisfies the SSG Buy criteria with a 5.0 UD and 15.8% TR.

- Value Line’s 6-23-06 report for AMGN shows a 23.7 PE in 2005 declining to an estimated 18.0 in the next 3-5 years. VL only reports an overall figure, not Hi and Lo PEs. My second scenario equates to an overall estimated PE of 20.60 (25.0 + 16.1 / 2) which is close enough for me as this is my analysis, not a copy of VL’s. IAS’s overall estimated PE is 26.75 (33.5 + 20.0 / 2).

QUESTIONS:

- What do you think….which analysis do you most agree with?

- Would you use another value for your Hi PE, one that’s higher or lower than my 25.0, and do you have any reason(s) that support your number ?

- Is there any other part of these SSGs that you would do differently or that you have questions about?

armin