No ovation for OmniVision
Our first miscreant this week is OmniVision
There is plenty of discussion about this company behind the Foolish scenes, and little of what we have to say is positive. For example, my esteemed colleague Stephen Ellis sees Micron
But the engineering team continues to work on software bugs that make the product unusable, despite a presumably complete hardware design. Time is money, especially when the competition looks hungry -- although the company is in no danger of going belly-up any time soon. The balance sheet is rather healthy, and although we don't yet have cash flow data from the latest quarter, OmniVision is consistently cash-flow positive, both on the operational and free flow lines.
With that in mind, I think it's more important to get the design right than to rush an unreliable product to market just to catch a wave. It does mean that the stock isn't likely to move north anytime soon, and the people sitting on shorted shares should feel good for a while. But if and when OmniFocus makes it to market, camera makers should jump at the chance to eliminate costly and finicky mechanical zoom assemblies in favor of OmniVision's all-digital solution to the same problem, and that resulting short squeeze could be fun to watch.
So maybe you want to take a swing at this one if you're a gambler. The downside doesn't look too bad right now, although there's no guarantee that the upside will ever come. That's where the gambling comes in.
Out of cake? Here, have another
Let's move on to Cheesecake Factory
Cheesecake Factory keeps rolling out new store locations -- 15 of them this fiscal year -- but same-store sales declined by 1.6% from last year. Management pinned the blame on "macro trends" in the restaurant industry at large, though higher operational costs surely didn't do anything to shore up the bottom line.
The newish Grand Lux Cafe concept is doing rather well, actually increasing same-store sales in both of the reported periods, and giving the company a promising path to future growth. But the real news here is, of course, the recent completion of the internal stock options expensing review that allowed the company to release 10-Q statements at all.
That review found improper granting practices in effect between 1997 and 2004, with a $5.5 million total impact on results over that period. The company is working up restated balance sheets, and this release contained little in the way of assets and liabilities details. But there was no evidence of intentional wrongdoing, and no heads will roll here. Instead, the board will be expanded by a member or two, and a new Chief Compliance Officer position will be created to oversee the redone compensation practices.
It's hard to invest in any company that doesn't have reliable financial data available. This has been a tough year for lovers of proper corporate governance, with normally respectable companies like Apple Computer
Thunder and lightning!
With that, we're landing at the final stop on this week's underachiever tour: RV manufacturer Thor Industries
Gas prices are settling back at a comfortably affordable level, and those aging baby boomers sure like to kick back in RVs to enjoy the autumn of their long lives. That combination makes the Recreation Vehicle Industry Association salivate, and companies like Thor and Winnebago
In that market, only Winnebago can mount a serious challenge to Thor's sector-leading revenues and margins, and both are expected to grow sales at about 15% annually over the long haul. Yet Thor shares are quite a bit cheaper than those of its rival, trading at about 16 times trailing earnings or roughly 1.2 PEG, while Winnebago issues fetch 26 times earnings with a 1.2 PEG ratio.
Your fellow investors in the Motley Fool CAPS community are equally mystified by this valuation disconnect, and Thor is a solid four-star stock today. If you know why the share price is so depressed, feel free to swing by and clue the rest of us in. It's free, it's fun, and we all get smarter with every new rating or comment.
That's all, folks!
Some of these underperformers are victims of larger circumstances, while others might have only themselves to blame. It's up to you to decide which down-on-their-luck companies should be able to pull themselves up by the bootstraps, and which really are stuck in the mud. Come back next Monday, and we'll take a look at another batch of mishaps and disappointments. It'll be both fun and educational.
Further Foolish reading:
- Winnebago Fumes Through 2006
- Cheesecake Factory's Traffic Problems: Fool by Numbers
- Foolish Forecast: The OmniVision Mirage
- Take cheap when you can get it.
Seeking great deals on unfairly punished stocks? Philip Durell and his merry band of Fools at theMotley Fool Inside Valuenewsletter service are standing by to help you find great stocks at ridiculously low markdowns. Try a30-day trial subscriptionto see whether bargain-hunting is right for you.
Fool contributorAnders Bylundholds no position in the companies discussed this week, and he's still several decades away from joining the RV crowd. UnitedHealth is an Inside Value and Stock Advisor recommendation. The Fool has adisclosure policy, and you cansee his current holdingsfor yourself.