Schawk Shocked: What You Need to Know (KO, PG, SGK)

Schawk Shocked: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Schawk (NYSE: SGK ) makes its money hawking Coca-Cola (NYSE: KO ) and Procter & Gamble (NYSE: PG ) products to supermarket shoppers -- but it's having a hard time winning over stock shoppers this morning, with its stock down 13%.

So What: Net profit, which had been boosted by an insurance settlement last year, slumped 44% in yesterday's Q3 earnings report. (No surprise there. Motley Fool CAPS members have been panning this stock for months.) Yet Schawk insists that an apples-to-apples comparison of the results, which ignores everything from the settlement's effects to currency fluctuations, would show it actually growing its earnings 10% year over year.

Now What: Investors aren't buying it, and I don't blame them. Sales and gross margin both declined in Q3. Accounts receivable grew 5.5%, even as sales slipped. Yet free cash flow at the company is still outrunning reported net income, and looks likely to surpass $45 million this year. Schawk is selling for less than 10 times free cash flow today, and expected to grow 15% per year over the next five years. Bad news is bad news, but this really looks like a buying opportunity to me.

Want more information on Schawk? Add it to your watchlist here by clicking here.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.

Coca-Cola is a Motley Fool Inside Value recommendation. Coca-Cola and Procter & Gamble are Motley Fool Income Investor picks. The Fool owns shares of and has written covered calls on Procter & Gamble. The Fool owns shares of Coca-Cola.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

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