Martha Stewart today said she's ready to do her time and just get her "nightmare" over with. She'll continue her appeal but hopes to begin serving her five-month prison sentence and put the ImClone Systems
No doubt, Martha. Stay on the straight and narrow now. In fact, you may not even want to read today's Motley Fool Take because we've got all kinds of vices -- cheap Coke, Tasers for the masses, and five stocks you'd be tempted to get your hot little hands on.
In today's Motley Fool Take:
- Another Case for OracleSoft
- Discussion Board of the Day: Cheap Air Fares
- 5 Stocks With Outstanding Returns
- Quote of Note
- Is This Taser for You?
- Coke on Sale
- More on Fool.com Today
Another Case for OracleSoft
When I bought shares of Oracle
What I didn't know is just how much the database king needs PeopleSoft.
In reporting first-quarter fiscal 2005 earnings yesterday, Oracle said new applications sales were down to $69 million from $107 million during the same period a year ago. Executives explained the shortfall by saying a number of deals expected to close would now be completed in the second quarter.
But that poor showing couldn't put a damper on an otherwise strong performance. Revenue rose 7% from last year to $2.22 billion, and net income climbed 16% to $509 million. Structural free cash flow once again was higher than net income, rising 24% to $528 million.
The good news for Oracle is that the results make the most compelling argument yet for an "OracleSoft" combination. PeopleSoft has seen its net income deteriorate in recent quarters, and Oracle's applications business clearly needs the boost.
Moreover, with cash flows growing as they are, Oracle can easily afford the $7.7 billion price tag it's proposing for PeopleSoft. Yet even with a decisive court victory over the Justice Department, Oracle still has several hurdles to clear before it can close a deal for PeopleSoft, including possible opposition from the European Commission, as well as two civil trials.
The wrangling is worth it, however. All indications are that Oracle would do better as OracleSoft. And that's saying something, for like Motley Fool Stock Advisor pick Dell
No wonder Oracle shares are up nearly 7% today. For a tech market in which earnings disappointments from heavies such as Intel
For more Fool coverage of Oracle:
- OracleSoft may be closer than we think, at least if Larry has his way.
- A Foolish duel over Oracle's prospects remains tight; are you bullish or bearish on the database king?
- Last quarter was equally strong for Oracle. Can the good times continue?
- Has Larry Ellison Gone Crazy?
- The Case for OracleSoft
Discussion Board of the Day: Cheap Air Fares
Which sites do you use when you need to book a flight or a room fast and at the best rate possible? What would draw you over to a lodging operator's own site? All this and more in the Cheap Air Fares discussion board. Only on Fool.com.
5 StocksWithOutstanding Returns
Ask any investor to name management's most important job, and you're likely to get just one answer: Earn the highest possible return on my investment. (Me? I'd probably say, "make sure there's enough coffee for that weird finance guy," but that's just me.)
There exists a strong correlation between return on capital and share prices (duh, right?). Some investors use return on equity (ROE) to measure management's effectiveness, which is OK, but I prefer return on invested capital, or ROIC for short. ROIC measures the return on not only equity but also borrowed funds, which is important because an overleveraged company can show fantastic ROE but only average ROIC. Anheuser-Busch
ROIC's major drawback is the confusion surrounding how to calculate it. I prefer a cash-flow-based method, using unleveraged net operating profit after tax, or NOPAT, divided by total invested capital. NOPAT is cash flow from operations plus after-tax interest expense. Invested capital is total assets, less non-interest-bearing, short-term liabilities.
Got all that?
Good. Regardless of a company's line of business, if it generates more cash with less capital than its competitors, it's usually successful. Taser International
By paying down its long-term debt and improving working capital management, specialty retailer Tuesday Morning
The Spiderman franchise has helped Motley Fool Stock Advisor pick Marvel Enterprises
There's always money to be made helping people slim down, and Weight Watchers
Finally, storage company Western Digital
Ben Graham explained that, over time, the market is a weighing machine. As you can see, companies that generate outstanding returns end up being quite heavy.
Fool contributor Chris Mallon owns shares of Anheuser-Busch through his private investment partnership.
Quote of Note
"Very little is needed to make a happy life." -- Marcus Aurelius Antoninus
This weapon is sold exclusively by Taser, which eliminates any middlemen eating into the company's high 44% operating margin. To understand the significance of that, consider the margins of a few companies with lighter business models: 30% at Coca-Cola
Those margins are one reason Taser was able to jump 42-fold in a 52-week period that extended into early 2004. The other is that orders continue to pour in for the company's existing products. With revenue growing 150% a quarter and profits growing even faster, the market notices -- and international orders have yet to pour in.
The company is innovating, too. New weapons systems are under development with General Dynamics
There is negative press. Dow Jones'
Taser has many of the traits that characterize Motley Fool Hidden Gems. The company has high insider ownership, is generating free cash flow, has a well-established market niche, and is growing revenue and profits. But hidden it is not! The company has a $1.1 billion market capitalization for only $46 million in trailing sales.
Taser now has a weapon for the general population. It may just be right for you. But if you are looking for a stock -- a hidden gem -- ready to explode when it is discovered, Taser is not for you.
For a free trial to the Motley Fool Hidden Gems newsletter, click here.
Fool contributor W.D. Crotty owns stock in Motley Fool Stock Advisor recommendation Marvel and has a subscription to the Motley Fool Hidden Gems newsletter. W.D. does not own stock in any of the other companies mentioned.
I'd like to think some of it's payback for the odd attempts to capitalize on the endlessly overhyped "low-carb" craze with a half-diet Coke, sneakily packaged in odd numbers to camouflage its higher price. There have been little missteps, but the real problem remains revenues. They're not growing much.
As W.D. Crotty pointed out back in July, when Coke took its major nosedive, case volume growth was anemic, and getting thinner. It was only an eighth of rival PepsiCo's
Give management a B for bluntness, at least. There was no attempt at sugarcoating in the title of the release, nor in the opening paragraph. New-ish chairman and CEO Neville Isdell's sternly worded remarks call the results unacceptable, saying "They are symptoms of problems that demand strong corrective actions...."
No kidding. Case volumes were predicted to remain flat. Earnings guidance was reduced to around $0.47 per share for the next quarter, and $0.90 per share for the second half of the year. Oh, by the way, knock off $0.10 per share for "impairment charges" related to a bottling law in Germany.
An 11% knock for the impact of a bottling law in one country? Do I detect the sweet smell of bath oil from an upcoming, supersized soak? Let me check... deep in my crystal ball... I perceive... lower operating expenses and increased profitability in the first half of 2005. (Let me know if I'm wrong.)
At the end of the day, a decision on Coke shares should defer to the cash flow sheet, and that's one place the firm continues to look OK. The $2.96 billion in cash from operations for the first half of this year outpaced net income, usually a good sign. And with capital expenditures around $500 million, free cash flow (FCF) is ample. But if you buy the stock today, the enterprise value is still 17 times the more than $5 billion of FCF during the trailing 12 months. That's cheaper than the market as a whole, but not the discount that the current uncertainty deserves. Fools jonesing for some Coke would do well to wait a bit and see if they can't get a better price.
For related Foolishness:
- No Coke with your toasty sub.
- What's the deal with C2?
- If C2 doesn't do it, why not rename Diet Sprite?
More on Fool.com Today
Tomorrow's huge winners are out there today. The trick is finding them, Tom Gardner says in The Next Home Run Stock.... In Exhausting Every Option, Bill Mann reports on a coalition of high-tech companies that is playing its latest gambit on trying to declaw options expensing.
In other news:
- Callaway's Double Bogey
- Race You to the Car Dealership!
- Billions Served: Get Your Share
- Room Disservice
For a list of all our stories from today, see our Today's Headlines page.