WEB NEWS GeoBargain Notes
As luck would have it , today, Hi-Shear announced that it will be acquired in an all cash deal at $19.18 per share. The stock closed at $11.88. Unfortunately we recently removed the stock from the GeoBargain list. Congratulations to those investors that still own the stock.
GeoBargain Notes
On August 28, 2009 the GeoTeam ® removed HSR from the GeoBargain list. We were initially impressed with what appeared to be a strong finish to its fiscal 2009 year end financial results.
Hi-Shear reported full year fiscal 2009 GAAP results of $0.98 vs. $0.52. The Company also highlighted that the year and fourth quarter included a one time pre-tax gain.
GeoTeam original comments :
Hi-Shear reported a one time gain in the fourth quarter, but did not explicitly break out a non-GAAP earnings per share figure, leaving it up to investors to do the math. The GeoTeam ® believes the accurate non-GAAP 2009 full year earnings per share figure to be $0.92 (fourth quarter $0.35 ).
Upon further analysis we have uncovered information in an archived 2008 shareholder presentation, indicating that 2008 GAAP earnings per share included a litigation expense. Without the expense Hi-Shear reported that its fiscal 2008 non-GAAP earnings per share was $0.84. We are a little annoyed that the Company did not provide in depth detail on this topic in its 2009 year end press release. It is a little odd that they discussed this item in a presentation that makes earnings per share comparisons appear better and then omit its discussion in a situation that also leads to a more favorable EPS comparison.
View the presentation
What does this all mean? The 2009 Non-GAAP full year and fourth quarter EPS growth falls well below GeoBargain requirements.
Furthermore, we had difficulty scheduling a timely interview.
The stock still may appeal to value investors given its low P/E, but the lack of forward looking commentary makes it difficult to forecast earnings. On a positive note, Hi-Shear did mention that some sales from its fiscal 2009 period will be pushed into fiscal 2010 due to customer delays.
Added to GeoBargain list on August 6, 2009 at $12.05
Reached a price of $14.15 on August 16, 2009, an increase of 17% since initiation of coverage
Price as of Sept. 1st, 2009 was $10.10, a decrease of 16% since initiation of coverage
Research
Hi-Shear Tech is down sharply in early trading. The GeoTeam® is speculating that this is the result of the company going ex-dividend today. A stock usually falls by the amount of the dividend payment. The dividend to be paid is $0.75 . HSR is down $1.64 to $11.61 . The GeoTeam® has added trading shares at current levels.
Potential Valuation Scenarios
Valuation Scenarios August 6, 2009 . ($12.05).
Data Inputs :
Fiscal Year Ends in May
Date
8/10/09
Price
$13.33
12 Months Trailing non-GAAP EPS a
$0.86
2008 EPS Growth Rate
65.4%
Trailing P/E Ratio a
15.50
PEG Ratio (P/E divided by growth rate)
0.24
a All EPS numbers are non-GAAP. Non-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . For a more complete explanation of the company's definition of non-GAAP please refer to its financial press releases. The GeoTeam® non-GAAP figures may, from time to time, differ from company supplied figures .Short-Term Valuation Scenarios
Date
8/10/09
Price Based on P/E of 25 on Four Quarters Trailing EPS
$21.50
Price Based on P/E of 20 on Four Quarters Trailing EPS
$17.20
Common rule of thumb that PEG ratio should be
less than 1.0
PEG Ratio Less than 1?
YES
These scenarios are not investment advice, but are scenarios based on some commonly used investment guidelines. They are provided to aid investors in making their own investment decisions.
GeoBargain Notes
Recall from our initial research that the
GeoTeam ® needed to verify items on Hi-Shear's financial statements in order to verify our our trailing non-GAAP earnings per share calculation of $0.92. After further inspection, a more appropriate trailing number is $0.86. In light of this development, we were able to generate
potential valuation scenarios for HSR .
Research
The GeoTeam® has coded Hi-Shear Tech (NYSE Amex:HSR) as a GeoBargain at $12.05 . Our preliminary analysis has the company currently meeting 7 of the 10 GeoBargain criteria . However, The GeoTeam® strong bottom line financial results . Hi-Shear has been on our radar for some time now, but had an outstanding legal issue that kept us from initiating an investment position. This legal issue was resolved on April 8, 2009 .
Other areas of concern:
At first glance quarterly EPS numbers have exhibited some volatility over the past few years. The GeoTeam Hi-Shear's press releases do not reveal much information about future growth prospects.
Hi-Shear reported a one time gain in the fourth quarter, but did not explicitly break out a non-GAAP earnings per share figure, leaving it up to investors to do the math. The GeoTeam $0.92 (fourth quarter $0.35 ). Also needing clarification is an item in the cash flow statement related to the one time gain.
The GeoTeam®
