Do you like cheap stocks? Companies with loads of cash on the balance sheet? Are you unfazed by the risk that a company's market looks like a dinosaur staring at a meteor? Then tomorrow, take a gander at the Q1 2006 earnings report due out from movie projector maker Ballantyne (AMEX:BTN). Ballantyne looks cheap and has cash aplenty, and its industry is in danger of extinction, courtesy of home theater systems, video on demand, and Netflix (NASDAQ:NFLX). What more could a Fool ask for?
What analysts say:
- Buy, sell, or waffle? Exactly one analyst follows Ballantyne, rating the stock a hold.
- Revenues and earnings. He doesn't provide a sales estimate, or a guess at what tomorrow's quarterly profits will be. Long-term, however (and that's the way we like to look at things, too), he's expecting Ballantyne to produce $0.35 per share in profits this year, which would be 13% better than last year.
What management says:
CEO John Wilmers pronounced himself "proud" of the company's performance last year -- when there would have been both sales and profits growth but for a $1.2 million one-time tax benefit that occurred in 2004, but did not recur in 2005.
Overall, Wilmers described his company as benefiting from "growth in domestic theater product demand while international sales levels remained relatively stable" in 2005. That said, Wilmers noted that industry conversion to digital film projection equipment is underway, and this will be the major challenge facing Ballantyne in the near future: staying ahead of the curve and remaining relevant in a digital world. To this end, Ballantyne is partnering with Japan's NEC (NASDAQ:NIPNY) to sell digital equipment, and exploring the possibility of servicing digital machines as well (which, if successful, should yield recurring revenues for Ballantyne).
What management does:
While it may not look it at first glance, Ballantyne's operations have shown significant improvement over the last 18 months. True, the rolling net margin is down, but only because of the aforementioned $1.2 million in tax credits in 2004, which were not repeated last year. Focus instead on the rolling gross and operating numbers, and you'll see that both are improving slowly by steadily.
|
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
12/05 | |
|---|---|---|---|---|---|---|
|
Gross |
27.1% |
27.5% |
27.3% |
27.4% |
27.5% |
27.7% |
|
Op. |
11.2% |
11.4% |
11.3% |
11.7% |
11.9% |
12% |
|
Net |
8.9% |
10.3% |
10.2% |
10.4% |
8.2% |
8% |
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
Ballantyne showed excellent inventory management in 2005, with its inventories declining 18% against year-end 2004. That conversion of inventories into cash helped the company's free cash flow exceed reported net income under generally accepted accounting principles, $4.7 million to $4.4 million.
The picture wasn't as good for accounts receivable, however, which grew 26%, far outpacing the year's 10% sales growth. That's a gap that we hope to see contract going forward.
|
Competitors |
Customers |
|---|---|
|
Genlyte (NASDAQ:GLYT) |
Disney (NYSE:DIS) |
|
General Electric (NYSE:GE) | |
|
Vivendi (NYSE:V) |
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Fool contributor Rich Smith does not own shares of any company named above.
