- CHART- know how to read charts. I firmly believe I can improve the price of buying or selling from an understanding of chart action.
Chart is tracking the market; 0
- ANALYSTS- read analyst reports but come to your own conclusions.
As of April; 1 strong buy, 3 buy, 8 hold, 3 underperform (according to CNBC); -1
- INSIDERS- if the people that know the company the best are not buying it, why should you?
Shares purchased by both the COO and the President purchased stock with a combined value of almost $2 million at prices of $21.22 and 23.75 respectively; +1
- MANAGEMENT DISCUSSION 10Q AND 10K- this is the only truthful thing you will read about a company. It’s composed by management, the auditors, and the firm’s lawyers. If all three of them can agree on the verbiage, it’s passed a big hurdle. Read it carefully. Pay particular attention to the Risks, Litigation, and Related Transaction sections. These are the things you will wish you had taken the time to read if something goes bad with your investment.
Top line growth has been 9.3% on average over the last three years. Gross margins have stayed stagnant at about 23% over the last 4 years along with 1.71% average operating margins. They are being investigated in accordance with the foreign corrupt policies act on suspected inappropriate compensation to African holdings. The company is cooperating with authorities to resolve the issue; 0
- RELATIVE PERFORMANCE- If the stock has a superior relative performance to the market in the short term
Underperformed the S&P since February of 2012; -1
- SECTOR OUTLOOK- buying a good stock in a bad sector can be a humbling experience
Municipal budgets for water infrastructure have been reduced due to economic downturn; -1
- CASH FLOW- cash flow is more accurate than earnings. Earnings can be more easily manipulated.
Cash flows are a bit sporadic and do not closely follow the fluctuations in earnings. Nonetheless, the company is still seeing positive cash flows each of the last 4 years; 0
- PEG RATIO- it’s good to find a company growing faster than it’s multiple.
1.18 (according to Yahoo! Finance); -1
- VALUATION- contrary to popular opinion, it does matter what you pay for a company. Check its discounted cash flow value. Buy it for less than what it’s worth, a 1, less a -1, about the same 0.
LAYN is trading at a market cap of 380.94 million; 35.92 million under its tangible book value of 416.86 million; +1
- CATALYST- what’s going to change the status quo?
Any potential merger or acquisition could be a positive catalyst for LAYN. Currently, they are actively pursuing to acquire profitable entities. They are also currently “exploring strategic alternatives for the energy division”; 0
Layne Christensen presents a very interesting case. The stock saw huge insider buying in September of last year, but has continued to decline since then. The CEO retired on the last day of their fiscal year receiving a generous retirement compensation plan, they had to file for an extension on their 10-K and to top it all off they are being investigated for bribery in Africa with a potential for $3.7 million in fines attached. There is talk in the management discussion about making changes in the energy division. This may indicate a spin-off and move away from the sector as a core part of the business. No news is yet to surface regarding the their plans, but I think that there must be a reason that those key directors bought so much stock. I tried to call management today, but was reverted to investor relations due to availability issues of the finance department because they are working on first quarter earnings. I have yet to receive a call back from investor relations.