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I searched far and wide for a stock to buy. I really like this company, but I am rolling the dice since they report earnings tomorrow after the market closes. But tomorrow I have to go to the doctor so he can stick his finger in my butt. Rather than miss my doctor’s appointment, I decided to buy this stock today. We’ll see how tomorrow turns out:
Today I bought SNX (SYNNEX Corporation) at $24.89. I will sell it in 4 – 6 weeks at $28.70. Here’s why I like SNX.
First of all, look at its chart:
It is apparent to me that SNX hit its bottom back in December of 2008 and has very strong momentum to the upside at this point. Better still it looks like it has experienced some execellent consolidation over the last 3 months and has formed a nice base to jump off.
SYNNEX Corporation, a business process services company, provides services in distribution, contract assembly, and global business services. What that really means is that SNX distributes tech products to resellers, mainly in North America, and provides assembly services to original equipment makers. They offer OEM’s and VAR’s an integrated suite of Business Process Services comprising: IT distribution, supply chain management, contract assembly and business process outsourcing (yep..THAT”s a dirty word). What they do is they get stuff to the market as efficiently as possible.
Now that is an incredibly vague description but what I can see very clearly is that fact that this company makes money…and lots of it. SNX has achieved 86 consecutive profitable quarters. There is nothing I like better than earnings, earnings, earnings. The company has three straight years of earnings increases. It has an EPS Stability Rating of 8 on a scale of 1 (steady) to 99 (volatile).
ANAL-ysts forecast 2009 earnings of $2.27 a share. They see 2010 EPS of $2.43, a 7% increase. In today's economy, it's hard to find a company that tops Wall Street's views in a single quarter, much less than for more than a year running. Synnex is one of those exceptions. The company has sailed past analysts' forecasts for six straight quarters. And earnings have grown at double digits over the same time frame. You’d think by now that the ANAL-ysts would get the hint. But I guess that’s why $$$MR. MARKET$$$ can continue to outperform the market – because these ANAL-ysts are imbeciles. More on that later.
Margins on business process outsourcing are substantial. While this business unit accounts for only about 3% of Synnex's revenue, it generates roughly 10% of the company's operating income.
For the fiscal first quarter ended Feb 28, 2009, revenues were $1.73 billion, a decrease of 1.13% compared to $1.75 billion for the fiscal quarter ended February 29, 2008. Income from operations was $34.7 million, or 2.01% of revenues, versus $32.8 million, or 1.87% of revenues in the prior year fiscal first quarter.
Net income for the fiscal first quarter was $19.5 million, or $0.59 per diluted share, exceeding Wall Street estimates of $0.52. This compares with $16.8 million, or $0.51 per diluted share in the prior year fiscal first quarter.
Global Business Services revenues were $32.92 million, an increase of 30.3% over the prior year fiscal first quarter.
The following statements are based on the Company’s current expectations for the second quarter of fiscal 2009.
All of this growth potential exists while SNX sits on a PE of 9.6. Holy macaroni that is cheap! It’s book value is $22/share! Synnex has established a more profitable business model than traditional distribution which has traditional P/E’s of 10 to 14 times earnings. So SNX valuation SHOULD be higher, not lower, than these other businesses. That’s pure upside through mean reversion.
SNX has superior execution, a highly efficient low cost and differentiated business model. Their strategy will drive growth, margin and Return on Invested Capital. They pride themselves on their exceptional people, their execution, the fact that they run a tight ship and that their business has significant upside. Synnex predicted a weak economy headed into 2008 and still delivered substantial EPS and ROIC growth.
That’s why $$$MR. MARKET$$$ thinks that 2009 earnings will actually be $2.66/share on revenues of $7.9 billion. If PE hits the midpoint of the range it should be (10 – 14) then I calculate that the share price should be $2.66 x 12 = $31.92/share, which is well past my sell price. This one should be a piece of cake.
But don’t listen to me…here’s what the boss says:
“Our outlook for the second quarter reflects the current demand environment in combination with our continued ability to execute and produce profitable results,” Murai continued. “We will continue to invest in key growth areas and services that will enable SYNNEX to continue to win market share and expand our profits and returns.”
“I am very pleased with the SYNNEX team’s ability to produce strong bottom line results and solid returns, especially in a challenging demand environment,” stated Kevin Murai, President and Chief Executive Officer. “We increased our market share, while at the same time delivering good gross margins and effectively managing our costs.”
I like this guy’s optimism. Maybe he can be my doctor.
If you like this write up, please let some friends know about the site. We need to replace the members we lost in order to keep it free. Please ask a friend to sign up at www.mrmarketishuge.com
$$$MR. MARKET$$$
Today I bought SNX (SYNNEX Corporation) at $24.89. I will sell it in 4 – 6 weeks at $28.70. Here’s why I like SNX.
First of all, look at its chart:
It is apparent to me that SNX hit its bottom back in December of 2008 and has very strong momentum to the upside at this point. Better still it looks like it has experienced some execellent consolidation over the last 3 months and has formed a nice base to jump off.
SYNNEX Corporation, a business process services company, provides services in distribution, contract assembly, and global business services. What that really means is that SNX distributes tech products to resellers, mainly in North America, and provides assembly services to original equipment makers. They offer OEM’s and VAR’s an integrated suite of Business Process Services comprising: IT distribution, supply chain management, contract assembly and business process outsourcing (yep..THAT”s a dirty word). What they do is they get stuff to the market as efficiently as possible.
Now that is an incredibly vague description but what I can see very clearly is that fact that this company makes money…and lots of it. SNX has achieved 86 consecutive profitable quarters. There is nothing I like better than earnings, earnings, earnings. The company has three straight years of earnings increases. It has an EPS Stability Rating of 8 on a scale of 1 (steady) to 99 (volatile).
ANAL-ysts forecast 2009 earnings of $2.27 a share. They see 2010 EPS of $2.43, a 7% increase. In today's economy, it's hard to find a company that tops Wall Street's views in a single quarter, much less than for more than a year running. Synnex is one of those exceptions. The company has sailed past analysts' forecasts for six straight quarters. And earnings have grown at double digits over the same time frame. You’d think by now that the ANAL-ysts would get the hint. But I guess that’s why $$$MR. MARKET$$$ can continue to outperform the market – because these ANAL-ysts are imbeciles. More on that later.
Margins on business process outsourcing are substantial. While this business unit accounts for only about 3% of Synnex's revenue, it generates roughly 10% of the company's operating income.
For the fiscal first quarter ended Feb 28, 2009, revenues were $1.73 billion, a decrease of 1.13% compared to $1.75 billion for the fiscal quarter ended February 29, 2008. Income from operations was $34.7 million, or 2.01% of revenues, versus $32.8 million, or 1.87% of revenues in the prior year fiscal first quarter.
Net income for the fiscal first quarter was $19.5 million, or $0.59 per diluted share, exceeding Wall Street estimates of $0.52. This compares with $16.8 million, or $0.51 per diluted share in the prior year fiscal first quarter.
Global Business Services revenues were $32.92 million, an increase of 30.3% over the prior year fiscal first quarter.
The following statements are based on the Company’s current expectations for the second quarter of fiscal 2009.
- Revenues are expected to be in the range of $1.63 billion to $1.73 billion.
- Net income is expected to be in the range of $15.7 million to $16.7 million.
- Diluted earnings per share are expected to be in the range of $0.47 to $0.50.
- SYNNEX is the #1 Intel distributor in North America for the last 3 years.
- SYNNEX has built 5 of the top 100 supercomputers in the world.
- They have grown revenue at CAGR 11% since 2005.
- Earnings have grown at CAGR 24% since 2005.
- With a substantial portion of their industry SG&A being variable costs, they can flex in a soft economy.
- A strong healthy balance sheet and liquidity.
- SNX is performing well in a challenging economic environment. They have lots of opportunities. They have a very small slice right now of a very big pie. They tap into an $800 billion dollar market segment.
All of this growth potential exists while SNX sits on a PE of 9.6. Holy macaroni that is cheap! It’s book value is $22/share! Synnex has established a more profitable business model than traditional distribution which has traditional P/E’s of 10 to 14 times earnings. So SNX valuation SHOULD be higher, not lower, than these other businesses. That’s pure upside through mean reversion.
SNX has superior execution, a highly efficient low cost and differentiated business model. Their strategy will drive growth, margin and Return on Invested Capital. They pride themselves on their exceptional people, their execution, the fact that they run a tight ship and that their business has significant upside. Synnex predicted a weak economy headed into 2008 and still delivered substantial EPS and ROIC growth.
That’s why $$$MR. MARKET$$$ thinks that 2009 earnings will actually be $2.66/share on revenues of $7.9 billion. If PE hits the midpoint of the range it should be (10 – 14) then I calculate that the share price should be $2.66 x 12 = $31.92/share, which is well past my sell price. This one should be a piece of cake.
But don’t listen to me…here’s what the boss says:
“Our outlook for the second quarter reflects the current demand environment in combination with our continued ability to execute and produce profitable results,” Murai continued. “We will continue to invest in key growth areas and services that will enable SYNNEX to continue to win market share and expand our profits and returns.”
“I am very pleased with the SYNNEX team’s ability to produce strong bottom line results and solid returns, especially in a challenging demand environment,” stated Kevin Murai, President and Chief Executive Officer. “We increased our market share, while at the same time delivering good gross margins and effectively managing our costs.”
I like this guy’s optimism. Maybe he can be my doctor.
If you like this write up, please let some friends know about the site. We need to replace the members we lost in order to keep it free. Please ask a friend to sign up at www.mrmarketishuge.com
$$$MR. MARKET$$$
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