22 November 2005

Battle Royale - NASDAQ Winners

This is the battle of NASDAQ 52-week highs (from last week) that I promised in the first Battle Royale post. Let's begin, without any Michael Buffer-style announcements.

Comparisons may be difficult to make with these apples and oranges, so I'm throwing out some extra numbers for your edification.


Numbers from SmartMoney.com: PEG 2.94, ROE/ROA/ROIC 343.96%/-23.46%/363.72%, Total Debt/Equity -.03
Free cash flow numbers from Morningstar.com: '00 - 18.3; '01 - (33.7); '02 - (21.0); '03 - 16.8; '04 - 37.3; '05 - 20.7
CNBC Stock Scouter Score: 10

Profile excerpts from Yahoo! Finance:
Aspen Technology, Inc. and its subsidiaries supply software and services to the oil and gas, petroleum, chemicals, pharmaceutical, and other industries that manufacture and produce products from a chemical process. The company develops software to design, operate, manage, and optimize its customers’ key business processes, including plant and process design, economic evaluation, production, production planning and scheduling, and managing operational performance.

I appreciate that AZPN is no start-up clamoring for quality clients. Check out this bit of immodesty from AZPN's website:

AspenTech boasts a client list that includes some of the major names in the process industries, including:

23 of the top 25 petroleum companies
47 of the top 50 chemical companies
19 of the top 20 pharmaceutical companies
16 of the top 20, and all of the top five, engineering, procurement & construction companies

AZPN could be an interesting derivative Fort McMoney oil play.

I'm having real trouble gathering quality information that would explain AZPN's sudden increase in share price. Some IBD and technical analysis-types are paying attention, as AZPN's trading volume is up along with the price, at its resistance level. Here is a pretty graph that back up my brief ignorant foray into the world of technical analysis.

I need a shower after that.

AZPN is interesting, with some decent, erratic positive free cash flow. The PEG is high, and the there's some debt, two negatives. I'd like to learn more about this one.


Numbers from SmartMoney.com: PEG N/A, ROE/ROA/ROIC 148.57%/-7.29%/-10.58%, Total Debt/Equity -9.63
Free cash flow numbers from Morningstar.com: '00 - (4944.0); '01 - (2184.0); '02 - (645.0); '03 - (167.0); '04 - (352.0); TTM - (368.0)
CNBC Stock Scouter Score: 6

Profile excerpts from Yahoo! Finance:
Level 3 Communications, Inc. provides communications and information services worldwide. It offers softswitch services, including managed modem for the dial-up access business, wholesale voice-over-IP (VoIP) component services, and consumer oriented VoIP services; Internet protocol and data services, such as Internet protocol transit and network interconnection solutions; and transport and infrastructure services that include high-speed Internet access services, wavelengths, and dark fiber services.

LVLT's debt load is astounding, and presumably correlates to their significant negative free cash flow. Analysts predict increasingly negative earnings over 2006. VoIP is a technology full of potential. Growth investors gravitate to trendy tech, but the cool factor only hastens my retreat from this stock.

Stephen D. Simpson at Fool.com sends LVLT to the showers in these excerpts:

There were also some encouraging words behind the numbers. Prices are declining more slowly, and demand is still firm. Of course, the capacity problem remains -- demand for network capacity is strong and growing, but there's still a glut of available capacity. Services like broadband Internet and voice over Internet protocol should take up more and more of this surplus, but that's going to take years.

No doubt Level 3 has good technology and customers -- including the likes of SBC (NYSE: SBC), Time Warner (NYSE: TWX), Microsoft (Nasdaq: MSFT), Comcast (Nasdaq: CMCSA), and Verizon (NYSE: VZ) -- but it's also got $6 billion in debt. Unlike the cable or cell phone companies of the '80s and '90s, Level 3 can't assume that its large initial losses will be offset by concurrent revenue growth and potential monopoly power.
Anyone who holds these shares today is likely a trader or speculator. That, or they have a great deal of faith in the idea that all of Level 3's built-out capacity will turn into real profits and shareholder value. Since I neither speculate in stocks nor invest on faith, I'll be staying well away from these shares.


Numbers from SmartMoney.com: PEG .20, ROE/ROA/ROIC 4.06%/2.57%/3.23%, Total Debt/Equity .26
Free cash flow numbers from Morningstar.com: '00 - 32.0; '01 - 2.6; '02 - (7.1); '03 - (17.9); '04 - (3.0); TTM - 0.7
CNBC Stock Scouter Score: 7

Profile excerpts from Yahoo! Finance:
RealNetworks, Inc. provides network-delivered digital media content and services worldwide. It also develops and markets software products and services that enable the creation, distribution, and consumption of digital media. The company primarily offers its products under two categories, Consumer Products and Services (CPS), and Business Products and Services (BPS). The CPS category offers digital music products and services, including Rhapsody, an ondemand digital music subscription service; RadioPass, an Internet radio subscription service; and the RealPlayer Music Store, which enables consumers to purchase and download individual digital music tracks.

Fool.com delivers more useful insight into RNWK:

Investors keep buying into different versions of RealNetworks (Nasdaq: RNWK). Some have invested on the heels of its settlement with Microsoft (Nasdaq: MSFT), which will fatten its already cash-stocked balance sheet. Others have bought into RealNetworks for its popular Rhapsody digital music subscription program, which continues to gain new listeners. Still others are buying into RealNetworks for the lucrative deals it brokers with wireless giants. Last night, as it does every three months, the company revealed the sum of those parts in its latest earnings statement.

RealNetworks posted earnings of $0.06 a share on a 20% spurt in revenues. The profit reversed a year-ago loss, though the company has been in the black for all three quarters of 2005. The current quarter will be a winner, thanks to Microsoft's nine-figure apology. RealNetworks will earn between $1.42 and $1.48 per share for the period. Obviously, though, that will be a one-time boost -- don't even try to incorporate those lofty sums into the company's earnings multiples.

Rhapsody's subscriber base has doubled over the past year to 1.3 million users. Yes, this is a competitive niche. Even though RealNetworks was a pioneer in digital music, it has to compete against the likes of Napster (Nasdaq: NAPS) and Yahoo! (Nasdaq: YHOO) in music subscription services, as well as Apple (Nasdaq: AAPL) and Microsoft when it comes to paid downloads.

Given its 184 million diluted shares outstanding, I'd really like to see RealNetworks use some of its balance sheet greenery to buy back even more shares. As strong as RealNetworks may appear to be, its earnings are getting watered down among all that stock. Unless RealNetworks is planning to buy out Napster or make any other synergistic acquisition, it's not likely to need all the money that's collecting cobwebs in its coffers.

Good to hear complaints about a company having too much cash. (I know, companies like MSFT and XOM have too much cash, and it becomes increasingly difficult to find ways to get a good investment return on that cash hoard, etc. etc.)

I wonder if that sexy PEG is a result of the MSFT settlement figured into earnings?


Numbers from SmartMoney.com: PEG N/A, ROE/ROA/ROIC 15.35%/13.18%/15.35%, Total Debt/Equity 0
Free cash flow numbers from Morningstar.com: '00 - 1.0; '01 - (0.1); '02 - 0; '03 - 0.1; '04 - 2.5; '05 - 0.9; TTM - 0.9
CNBC Stock Scouter Score: 6

Profile from Yahoo! Finance:
U.S. Global Investors, Inc. through its wholly owned subsidiaries, provides mutual fund management services. It provides investment advisory services to institutions and individuals; transfer agency and record keeping services; mailing services; and distribution services to mutual funds advised by the company. The company primarily invests in early-stage or start-up businesses. U.S. Global Investors was founded in 1968 and is headquartered in San Antonio, Texas.

GROW sells 13 different mutual funds, several of which earn four and five-star ratings from Morningstar. This is a small purveyor of funds. So will GROW grow?

IBD gives GROW an overall score of 81, or a B. The S&P report reads in a similar B-grade, somewhat positive fashion. But the folks at Yahoo!, teaming up with IBD, have this stock at #3 on a top under-$10 stocks list.

This battle is too close to call between AZPN, RNWK and GROW. I would appreciate any readers comments on this one.

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