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Home | Getting Started | Personal Finance | Q & A | Sample Portfolio | Glossary | About Us |
| Date: Monday 13th 2008f October 2008 06:12:52 PM |
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Komag Memory in our Portfolio - 06/01/2007 |
| By: Hari Wibowo |
 Komag
Inc. (KOMG) caught our attention as it supplies the majority of the hard
disk drive industry for thin-film media, a forward P/E ratio of 8 while
boasting $ 3.23 per share of positive net cash. Share is trading at $ 24 per
share lately. A forward P/E ratio of 8 is absurdly low for such a low debt
company. Therefore, let's analyze further if such earning per share is
achievable in the near future.
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| Komag's revenue is derived based on the hard drive industry, which grows roughly similar with the combination of the PC and server industry. Meanwhile, labor cost is estimated to rise by 12% due to the strength of Malaysian currency, Ringgit. For details, you can view our EPS estimate calculation for Komag. EPS for Komag is predicted to be $ 3.56 per share for 2007. For 2008, we shall assume the same EPS assumption even when the hard disk drive industry experiences an upturn. | |
| Asssuming that we want higher yield of 8% for Komag, its P/E value is 12.5. Based on EPS of $ 3.56 per share this year and next year and $ 3.23 per share of positive net cash, Komag's fair value is: | |
| Fair value = stock price - (cash+ short-term investment)+ long-term debt. | |
| Real price = stock price - (cash+ short-term investment)+ long-term debt. | |
| EPS X 12.5 = stock price - positive net cash | |
| Stock price = $ 3.56 x 12.5 + $ 3.23 = $ 47.73 /share. | |
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Current stock price of Komag is $ 24.26 per share,
which represents 97% potential appreciation of Komag shares. Therefore, we
decide to buy $ 2000 worth of Komag shares for our
stock portfolio
today.
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| END |
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| Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Komag Inc. (KOMG) or any other securities. |
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