In late February I posted a stock analysis over at Seeking Alpha where my conclusion was to wait for lower prices. The company was undervalued on a relative basis against its competitors but it seemed a bit overvalued on its' own merits based on my analysis. It wasn't grossly overvalued but it was trading higher than my fair value calculation and I felt that there were better values to be had at the time. Thus my conclusion was to wait for a small retreat in the share price to give better value for the long term investor.
I've received a bit of criticism because between then and now the share price has increased about 16%. Ooops! Now don't get me wrong I can take criticism and I want each of you to question everything you see here and anywhere else for that matter. We're all looking to improve our investing skills and an open forum for that is the best way. Discussion breeds improvement. Due to that criticism I decided to take a look at some common metrics for the company to see whether the value has gotten better in conjunction with the increase in share price.
On every one of these metrics the company is now more expensive despite essentially nothing changing at the company. Analyst estimates for five year earnings per share growth were 6.90% in February versus 7.20% now with revenue growth forecasts of 0.70% then and 0.80% now for FY 2014. Growth forecasts have increased slightly but in my opinion it's not enough to justify the 16% rise in share price. Although it's still offering better value relative to its competitors.
Obviously I was completely wrong about the merits of the stock from a short term perspective, but I never claimed to have any idea about short term movements in the market. To judge short term opportunities you're most likely going to need to know a lot more about technical indicators (whether those are reliable is for someone else to answer) and a lot of luck.
When you read my stock analysis reports remember that it's a starting point. I'm presenting the facts and where I see the company on both a quantitative and qualitative level. My fair value calculations are not values that are set in stone. They are approximate price targets for where I would deem the company cheap and should therefore accumulate lots of shares or fairly valued or over valued. I don't have a hard and fast rule about only purchasing shares at valuations less than my fair value price and I don't always go on a buying spree when the shares are undervalued; asset allocation and other values present in the market determine that. As an accumulator of long term assets it's important to remember that lower prices for the same business equals higher value for the long term.