The Long Term Investor

New Century Financial Corporation stock analysis

2005-11-27T14:22:00.000Z

New Century Financial Corporation( NASDAQ: NEW) is a real estate investment trust (REIT). Founded in 1995, this mortgage finance company provides first and second mortgage products to borrowers nationwide throught operating subsidiaries New Century Mortgage Corporation and Home123 Corporation.
For further information, including SEC reports and stock history, please follow this link.

NEW as a solid earnings history, with an historical EPS growth rate of about 22%; very low debt and it pays regular dividends on a quarterly basis.

In the current analysis all data will be provided using an expected EPS growth rate of 20% ( lower than the historical of 22%). The return rates are calculated using the stock price of $39.8 (25/11/2005)

1st SCENARIO - P/E= 15 (Optimistic - even thought half of the maximum P/E of the last 5 years)

5 year Return Rate = 47,39%

An investment of $10,000 will be worth about $69,564 in 2010. A 15% Return Rate will still be possible until the $134.5 barrier.

2nd SCENARIO - P/E= 7,5

5 year Return Rate = 28,31%

An investment of $10,000 will be worth about $34,782 in 2010. A 15% Return Rate will still be possible until the $67 barrier.

3rd SCENARIO - P/E= 5 (the current P/E)

5 year Return Rate = 18,32%

An investment of $10,000 will be worth about $23,188 in 2010. A 15% Return Rate will still be possible until the $44,85 barrier.

4th SCENARIO - P/E= 3 (Pessimistic - the lowest P/E of the last 5 years)

5 year Return Rate = 6,83%

An investment of $10,000 will be worth about $13,900 in 2010. However, if you want a 15% Return Rate, you would have to buy the stock at $26.9 per share.

FINAL NOTE:

We believe that this stock as a great potencial. According to our analysis, even if you opt for a very prudent view, a relevant gain will still ocurr. It's true that since the beginning of November the stock as run up more than 20%, yet it's still possible to buy it above the $44 barrier, which is a very reasonable scenario.

Thank you for your time.

The next target...

2005-11-21T17:18:00.000Z

This mortgage company as a lot to say... and, probably, to give!

Unique analysis this week.

Just one opinion!

2005-11-09T18:08:00.000Z

... to Choose!

2005-10-30T13:18:00.000Z

That's right, for the next 3 weeks you will be able to choose which stock you want for us to analyse. However there are 2 conditions:

1. NO startups or OTCC;

2. The company MUST have a reasonable earnings history, 10 years at least.

So leave your choice beneath, leaving a comment, or above, by sending an e-mail.

Thank you for your time.

Starbucks Stock Analysis

2005-10-24T14:51:00.000+01:00

STARBUCKS?

Not a unique service, however dedicated customers, willing to pay extra;
Reliable and predictable earnings history ;
Conservative debt( it's been actually descreasing over time);
High R.O.E history (15% five year average);
History of stock buybacks and no dividends.

In the current analysis all data will be provided using an expected 5 year growth EPS of 21%. To note that this percentage is smaller than of the lowest forecast of 10 different analists. The return rates are calculated using the stock price of $27.95 (24/10/2005).

1^st SCENARIO – P/E= 40 (Optimistic)

5 year Return Rate = 17.37%.

An investment of $10,000 will be worth about $22,271 in 2010. A 15% return rate will still be possible until the $33 barrier (Net Present Value).

2^nd SCENARIO – P/E =30

Return Rate = 10.81%.

An investment of $10,000 will be worth about $16,703 in 2010. However, if you would like 15% return rate, you would have to buy the stock at $23.2 per share (Net Present Value).

3^rd SCENARIO – P/E = 20

Return Rate = 2.18%

An investment of $10,000 will be worth about $11,136 in 2010. However, if you would like 15% return rate, you would have to buy the stock at $15.5 per share (Net Present Value).

4^th SCENARIO – P/E = 15 (Pessimistic*)

Return Rate = -3.54%.

An investment of $10,000 will be worth about $8,351.94 in 2010. However, if you would like 15% return rate, you would have to buy the stock at $11.61 per share (Net Present Value).

* The highest P/E of the last 5 years was 101, the lowest was 38.5. After the stock split (1:2) that happened today (10/24/2005) the current P/E is of 46.5.

FINAL NOTE:

The current stock price is not overvalued, as it would allow a 10% five year return rate. That's about gaining more than half of the original investment in 5 years. The stock split as just happened, so the most wise thing to do is wait, so that the market can define a way. We believe that a price around $25 would be a good entry point, but in the short term, the greatest advise we can give is... pay attention and wait!

Thank you for you time.

The Sweet Smell...

2005-10-20T21:38:00.000+01:00

Next monday take a sip at this!

Dell stock analysis

2005-10-17T14:09:00.000+01:00

Why DELL?

As a unique service, online only – lowest costs of the industry;
Excellent earnings history ( historical EPS more than 20% on average);
Conservative debt ( Current Assets > Total Liabilities );
High R.O.E history ( 41% five year average);
History of stock buybacks and no dividends.

In the current analysis all data will be provided using an expected 5 year growth EPS of 19%. To note that this percentage is smaller than the one that happened in the last 5 years. The return rates are calculated using the stock price of $32.93 ( 10/15/2005).

1^st SCENARIO – P/E= 30 ( Optimistic)

Return Rate = 20.73%.

An investment of $10,000 will be worth about $25,873 in 2010. A 15% return rate will still be possible until the $42 barrier ( Net Present Value).

2^nd SCENARIO – P/E =21

Return Rate = 12.42%.

An investment of $10,000 will be worth about $18,111 in 2010. However, if you would like 15% return rate, you would have to buy the stock at $29.4 per share ( Net Present Value).

3^rd SCENARIO – P/E = 17

Return Rate = 7.77%.

An investment of $10,000 will be worth about $14,622 in 2010. However, if you would like 15% return rate, you would have to buy the stock at $23.8 per share ( Net Present Value).

4^th SCENARIO – P/E = 11.75 ( Pessimistic*)

Return Rate = 0.1%.

An investment of $10,000 will be worth about $10,134 in 2010. However, if you would like 15% return rate, you would have to buy the stock at $16.45 per share ( Net Present Value).

* Lowest projection for the year 2010 according to the Nasdaq Website. The highest P/E of the last 5 years was 61.62, the lowest was 21.29.

FINAL NOTE:

The current stock price seems to be quite reasonable, as it will allow, a possible and expected, 12% five year return rate. It is not our purpose to say that you should buy immediately, however it is our purpose to say that your purchasing price always as a determinant influence in the expected rate of return. Sometimes to wait, is, in fact, the best option and a 15% return rate doesn’t seem that far!

Thank you for you time.

And the winner is...

2005-10-14T12:00:00.000+01:00

Just to say that the first analysed company will be...Dell.

Honesty begins Monday

2005-10-13T18:23:00.000+01:00

Starting next monday, this blog will, regularly, provide an accurate and honest analysis of chosen companys. This companys must always, i repeat... always, have a consistent and predictable earnings history. No startups or OTCC will be analised... this is serious long term allocation - always!