Your Adarsh™

Letz mint some ‘ka-ching’

*What’s wrong with analysts? (HLYS)

 An article published today on Forbes reads ” Heelys Shares Rise on Upgrade
The stock was up yesterday after hours for the cancellation of the 4.5 million shares SEC filing, not after some analyst upgraded it today late morning!!!! What’s wrong with Forbes news reports?
         Moreover, I also am not impressed with what Analyst Sujata Shekar from CIBC had to say about the stock. She raised 2007 estimates to $1.79 from $1.49 and introduces a $32 target tag on the stock. That gives Heelys, a company growing very much more than 100%, more than 50% shorted, with a cheap P/E of around 17.5. woooooo What the ‘Analysis’?
        My studies and analysis tell my brain that when you upgrade a stock to ‘sector outperformer’ from a ‘sector performer’…you take into account for default that it’s P/E is going to improve not decrease!!!
        But according to ‘Analyst Sujata Shekar’, the stock which was trading on an average P/E of around 18.5, will OUTPERFORM the sector and go down in price valuation ending the year with a P/E of around 17.5.
Does something ring bells in your head? Isn’t something wrong here?

My take on Heelys :

       Taking a 25% growth in the next two quarters which every body knows is going to be easily beaten by the company, I value HLYS should be trading currently at 1.31 * 25 = $32.75 . ($1.31 earnings is average of all analysts)

Conversely, I opine they’ll make a minimum $1.8 which puts us at1.8 * 25 = $45, by the year end…and I add $4 for the short covering which should place the stock price around $50 by the year end.

This taking into consideration that they do not throw out new news screwing up the price creating volatility again. If they do that…I decrease the price target by $5. That should put us around $40-$49 a share by year end. A acquisition rumour or a merger news should boost the price then to newer never adventured levels. Heelys gives us the best Profit/Loss ratio to get them into your portfolio.

This is just by taking into consideration that they have a P/E of just 25.

We are increasing our long holding, once the price consolidates.

Comments appreciated.

Good Luck,



June 29, 2007 - Posted by | Blogroll

1 Comment »

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