The Finnish phone professionals of Nokia
What Fools say:
Here's how Nokia's CAPS rating stacks up against some of its peers and competitors:
|
Market Cap (billions) |
Trailing P/E Ratio |
CAPS Rating |
|
|---|---|---|---|
|
Nokia |
$63.4 |
8.7 |
**** |
|
QUALCOMM |
$65.3 |
19.3 |
**** |
|
Research In Motion |
$34.1 |
19.7 |
** |
|
LM Ericsson Telephone |
$22.3 |
11.1 |
*** |
|
Motorola |
$12.4 |
N/A |
** |
Data taken from Motley Fool CAPS on 10/14/2008.
"In a recession, one of the first things to go will be fancy phones," says CAPS player SwordAgain in support of a thumbs-down rating on Nokia. But where the bears see macroeconomic issues, bulls like AlNameless focus on the fundamentals: "Nokia has dominant market share. Very low P/E, almost debt-free, a significant dividend of almost 5%, but still a payout ratio of only 30%. They prefer losing some market share temporarily to protect the bottom line. This is a prudent approach. An outperformer."
What management does:
The gross margin is still expanding in an impressive show of market muscle and pricing power. The next trick I'm looking for is how to turn that power into copious cash flows. That's where the Finns have fallen down recently.
|
3/2007 |
6/2007 |
9/2007 |
12/2007 |
3/2008 |
6/2008 |
|
|---|---|---|---|---|---|---|
|
Gross |
32.4% |
31.9% |
32.7% |
34.5% |
35.1% |
35.7% |
|
Operating |
12.7% |
13.9% |
14.7% |
13.9% |
13.7% |
11.9% |
|
Net |
10.2% |
13.4% |
14.1% |
14.1% |
13.8% |
10.5% |
|
FCF/Revenue |
10.9% |
11.6% |
12.9% |
14.0% |
11.6% |
11.3% |
|
Growth (YOY) |
3/2007 |
6/2007 |
9/2007 |
12/2007 |
3/2008 |
6/2008 |
|---|---|---|---|---|---|---|
|
Revenue |
14.2% |
16.3% |
18.3% |
24.2% |
29.9% |
23.0% |
|
Earnings |
11.5% |
43.0% |
61.8% |
67.3% |
75.8% |
(3.4%) |
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:
I thought Nokia was cheap three months ago, but the sale has gone even deeper, and those American depositary shares are 30% less expensive today.
Of course, that discount has its reasons. Competition is fierce in the cell-phone market, including fancy new offerings at the high end. The BlackBerry Storm, Apple's
So, Nokia acknowledged these competitive forces in early September and warned of slower sales growth. "Nokia's strategy is to take market share only when the company believes it to be sustainably profitable in the long term," management said.
I'd take prudent growth over blind market share chasing any day, especially in these turbulent times. Nokia is one of the latest additions to our Motley Fool Inside Value roster, so the elder Fools behind that recommendation clearly feel the same way. The third-quarter report is but another milepost on the marathon road to market-crushing long-term investment returns.
