Stock Research


Symbol Lookup

Free Research

Rating Changes

Articles

Stock Ideas

Hot List

Model Portfolios

Guru Screener

Adv. Guru Screener

Top Industries

Stock Analysis

Guru Analysis

Stock Tracker

My Portfolio

About Us

Introduction

Videos

Help

About John Reese

Guru Investor Book

Press Room

Featured Gurus

Warren Buffett

Benjamin Graham

Peter Lynch

Joel Greenblatt

Martin Zweig

David Dreman

John Neff

Kenneth Fisher

Joseph Piotroski

Gurus by Style

Value Stocks

Growth Stocks

Dividend Stocks

Growth/Value Stocks

Customer Service

Refer a Friend
Enter Email:

Rating Change Detail - CAPSTONE MINING CORP. (CS) - 2/13/2013
The stock was upgraded from No Interest to Some Interest on 2/13/2013 by the Small-Cap Growth Investor Strategy based on the principles of the Motley Fool. The score according to this strategy rose from 46% to 74%. A full detailed analysis of CS using this strategy is included below. For a full detailed analysis of CS using 12 proven strategies of Wall Street Legends, take a free trial to Validea.ca

Detailed Analysis of CAPSTONE MINING CORP. (CS)

Strategy: Small Cap Growth Investor - Based on: Motley Fool

PROFIT MARGIN: [PASS]

This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. CS's profit margin of 17.14% passes this test.

RELATIVE STRENGTH: [FAIL]

The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. CS, with a relative strength of 74, fails this test.

COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL]

Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for CS (-50.00% for EPS, and -9.91% for Sales) are not good enough to pass.

CASH FLOW FROM OPERATIONS: [PASS]

A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. CS's free cash flow of $0.41 per share passes this test.

PROFIT MARGIN CONSISTENCY: [PASS]

CS's profit margin has been consistent or even increasing over the past three years (Current year: 17.14%, Last year: 24.09%, Two years ago: -7.32%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise.

R&D AS A PERCENTAGE OF SALES: [NEUTRAL]

This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in CS's case.

CASH AND CASH EQUIVALENTS: [PASS]

CS's level of cash $509.0 million passes this criteria. If a company is a cash generator, like CS, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash.

INVENTORY TO SALES: [PASS]

This methodology strongly believes that companies, especially small ones, should have tight control over inventory. It's a warning sign if a company's inventory relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Inventory to Sales for CS was 22.19% last year, while for this year it is 13.45%. Since the inventory to sales is decreasing by -8.74% the stock passes this criterion.

ACCOUNT RECEIVABLE TO SALES: [PASS]

This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for CS was 0.00% last year, while for this year it is 8.12%. Although the AR to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive.

LONG TERM DEBT/EQUITY RATIO: [PASS]

CS's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow.

"THE FOOL RATIO" (P/E TO GROWTH): [FAIL]

The "Fool Ratio" is an extremely important aspect of this analysis. Unfortunately, CS's "Fool Ratio" is not available due to a lack of one or more important figures. Hence, an opinion cannot be given at this time.

The following criteria for CS are less important which means you would place less emphasis on them when making your investment decision using this strategy:

AVERAGE SHARES OUTSTANDING: [FAIL]

CS has either issued a significant amount of new shares over the past year or has been issuing more and more shares over the past five years. CS currently has 381.0 million shares outstanding. Neither of these are a good sign. Generally when a small-cap company issues more stock, the existing stock becomes devalued by the market, and hence diluted.

SALES: [PASS]

Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. CS's sales of $320.0 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". CS passes the sales test.

DAILY DOLLAR VOLUME: [PASS]

CS passes the Daily Dollar Volume (DDV of $4.4 million) test. It is required that this number be less than $25 million because these are the stocks that remain relatively undiscovered by institutions. "You'll be scoring touchdowns against the big guys on your turf."

PRICE: [FAIL]

This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. CS with a price of $2.65 fails the price test as it is considered too low. It is required that the price to be at least greater than $7 to eliminate penny stocks.

INCOME TAX PERCENTAGE: [PASS]

CS's income tax paid expressed as a percentage of pretax income this year was (44.44%) and last year (36.73%) are greater than 20% which is an acceptable level. If the tax rate is below 20% this could mean that the earnings that were reported were unrealistically inflated due to the lower level of income tax paid. This is a concern.

For a full detailed analysis of CS using 12 proven strategies of Wall Street Legends,
take a free trial to Validea.ca

Rating Change Detail - CAPSTONE MINING CORP. (CS) - 2/13/2013

Detailed Analysis of CAPSTONE MINING CORP. (CS)

Strategy: Small Cap Growth Investor - Based on: Motley Fool