Examining EMC

Many companies accumulate vast amounts of data as they do business, especially large ones like banks, airlines, and insurance companies.  They have an ever-growing need to store, organize and retrieve that data.  EMC Corp is a full-service manufacturer and provider of high-end storage hardware, software and related services. 

 

According to Value Line, EMC’s price reached a high of $104.90 per share in 2002 and a low of $3.70 in 2002.  It is currently selling at $15.74, close to its 52-week low of $12 and was a featured stock in the September issue of the Investment Advisory Service’s newsletter.

 

Here is a comparison of IAS’s SSG with Take Stock and two SSGs of mine (one with S&P data and the other with Hemscott data, but both with the same judgments).

 

EMC Corp (EMC)	IAS	Armin-1	Armin-2	Take Stock
Date	8-6-08	8-22-08	8-22-08	8-23-08
Data	S&P	S&P	Hemscott	Hemscott
Price	$14.79	$15.74	same	$15.74
52 week High & Low Price = $25.47 & $12.06
Sales Growth	15.00%	10.00%	same	8.00%
EPS Growth	15.00%	10.00%	same	2.5%
High PE	25.0	28.5 (3 outs)	27.0 (same)	30.0
High Price	$36.80	$34.50	$36.20	$26.70
Value Line Estimated High Price = $20-35 as of 7-11-08
Low PE	15.0	19.6 (3 outs)	19.5 ( same)	11.7
Low Price	$11.00	$10.60 (ave low)	same	$13.19
Upside/Down	5.8	3.4	4.0	4.3 (imputed)
Total Return	20.0%	17.0%	18.1%	05.4%
SSG Buy Under	$17.45	$16.35	$17.00		$13.35
RV/PRV	66.1/57.5	87.1/79.2	81.5/74.00		N/A
RV/PRV (no outs)	66.1/57.5	70.5/6	65.1/59.0		N/A
Quality	B	B	Not Rated		2.6 below minimum
PTPM – 5 yr ave	14.5% trend even	14.5% trend even	14.7% trend up	14.5% trend N/A
ROE – 5 yr ave End Equity	09.4% trend up	09.4% trend up	09.8% trend up	N/A
ROE – 5 yr ave Start Equity	10.5% trend up	10.5% trend up	10.9% trend up	10.9% trend N/A
Debt to Equity –  5 yr ave	12.9% trend up	12.9% trend up	12.2% trend up	N/A

 

– When I did my SSGs, the analysts were estimating long-term EPS at around 14%.  FactSet CallStreet and Zacks were high at 15.00% while First Call was low at 12.86%.  Value Line was 13.50% and S&P as well as Reuters via Morningstar were 14.50%.  The average of all six was 14.23% and the average less one Standard Deviation was 13.38%.

 

– I estimated 10.00% EPS while IAS used 15.00%.  With S&P data, my analysis resulted in a SSG Buy with a 3.4 Upside/Downside Ratio and a 17.0% Total Return, and my Forecast High Price was just under Value Line’s estimate.  With Hemscott data and the same judgments, I got a 4.0 Upside/Downside and a 18.1% Total Return.

 

– IAS also got a SSG Buy, but with higher values, probably because IAS started with a higher EPS estimate of 15.0%.  IAS had a 5.8 Upside/Downside Ratio and a 20.0% Total Return.

 

– Take Stock was nuts with a low-ball and unrealistic 2.50% EPS estimate for the next 5 years which led directly to an unreliable 5.8% Total Return.