Monday, August 1, 2011

Making Easy Money



The NFL lockout has created plenty of new characters for the average sports fan, and lots of different groups have sought to paint themselves at victims and everyone else as villains.

The one group that, unequivocally, has a greater burden than everyone else is the NFL rookies. 

Some of those rookies spoke with Bleacher Report at the NFLPA's "Business of Football" symposium at the IMG Training Facilities in Bradenton, Fla.

The NFL draft is a great event. The image of Cam Newton holding up a Carolina Panthers jersey, standing next to the beaming Roger Goodell, will be forever burned into the memories of countless NFL fans.

Since then, no paychecks have rolled in, no millions have been rolled in, no mansions have been moved into.

If MTV Cribs wants to showcase any of the NFL rookies, they will have trouble fitting all of that production equipment into one-room apartments or parents' basements.

Charles Clay (FB Dolphins) made headlines a few weeks back when he told The South Florida Sun-Sentinel that he has started cutting lawns to make money during the lockout. Clay has wanted to take part in the much-publicized, player-organized lockout workouts, but he can't afford to take a day off.

Not everyone is a sixth-round fullback, however.

Will Rackley (OL Jaguars) is living it up in real style, in a small apartment by his college campus in Bethlehem, Penn.

When I asked Rackley if he's had a chance to get together with his teammates, he said no. He can't afford a trip to Jacksonville right now. He's been using Twitter to learn more about his fellow Jaguars and was thankful that he could spend time with Blaine Gabbert at the NFLPA Symposium.

Anthony Castonzo (OL Colts) had one of the best responses when I asked him if there was one specific thing he had spent his money on:

"I ain't got no money to spend! Basically the only thing I spend money on is food right now. I'm living at my parents' house and not really spending money on anything. I don't have any money to spend. It's been very modest for me since the draft."

Titus Young (WR Lions) is also living with his parents in L.A. Marcell Dareus (DT Bills) is doing yard work in place of rent for his godfather in Birmingham.

Not exactly champagne wishes and caviar dreams.

Checking in with the first-rounders, Christian Ponder (QB Vikings) has been living in Bradenton on the IMG Campus working out. He made headlines when it was learned he flew teammates down for workouts in Florida.

It is important to remember, that isn't really Ponder's money. If Ponder never plays a down in the NFL, he still owes that money to IMG. Rather, it's an investment he's made in his future and in his relationship with his teammates.

"It's eye-opening for a lot of people, guys are accepting a lot of money they haven't had before, and it's easy to let it all slip out of your hands," Ponder said. "It's all about making good decisions with your financials."

Ponder was also impressed with a session by former New York Giants WR Plaxico Burress:

"It sounds like he has really changed and learned from the whole thing that he went through. He was telling the guys that every decision you make has a consequence good or bad and make the right decisions."

The Vikings' first-round pick plans to move to Minneapolis next week after spending Independence Day with his family.

The easy, and incorrect, write-off to this story is that all these rookies need is patience while they wait for the millions and millions of dollars to roll in. However, that convenient answer ignores the very real reality that these players face. 

A sizable chunk of these rookies may never see an NFL field. Some will languish on NFL practice squads; others will be cut outright and try to ply their trade in the UFL or north of the border. Still more will likely suffer a career-ending injury very early in their careers.

The lockout changes this dynamic even more, as shortened training camps could lead NFL teams to lean heavily on veterans in the upcoming season, eliminating the dreams of potential players even more than usual.

As a deal is getting done or not getting done, these NFL rookies are in a truly unique position in NFL history—fighting that much harder to make their lifelong football dreams come true.

 

Michael Schottey is an on-call editor for the Bleacher Report College Writing Internship, as well as an NFL Featured Columnist and an NFL Labor/Draft Expert. A member of the Pro Football Writers of America, he has professionally covered the Minnesota Vikings and the Detroit Lions, as well as NFL events like the Scouting Combine and the Senior Bowl. Follow him on Twitter.





New to the investing game and interested in learning some metrics that can help you analyze a company’s prospects? If so, this can be a great place to start your education.


To create the list of stocks below we have pulled together several financial analyst metrics to find companies with bullish indicators. Each term is defined in detail to help you perform your own analysis.


In making this list we focused on cash flow growth - arguably one of the most important considerations in the financial analysis of a company. While earnings and net worth are subject to management estimates, cash flow is very difficult to alter.


We wanted to search for companies exhibiting positive trends in cash flow growth. We began by screening for those companies that also had a high compound annual growth rate (CAGR) in free operating cash flow (above 20%) for the past 3 years. We then focused on the names that remain significantly undervalued to their mean analyst target price.


These companies also have higher earnings before interest, taxes, depreciation and amortization (EBITDA) than debt for the last year. Lastly, we narrowed down our list by those experiencing significant increases in institutional buying over the current quarter.


Don’t fully understand these terms? Let’s take a look at what each of these metrics mean and why they are important: 
 


Compound Annual Growth Rate - CAGR
This is the year-over-year growth rate of an investment over a given time. In this article, we used CAGR with Free Operating Cash flow (see below). When a company has a high Free OCF growth rate, it means the company has become increasingly efficient in generating cash from the running its business.


Free Operating Cash Flow
Free operating cash flow (FOCF) is the total operating cash flow minus all operating expenditures, such as wages, repairs, and depreciation. Strong free cash flow signals a company's ability to pay debt, dividends, and invest in their business growth.


Institutional Buying
Institutional investors are also known as "big money" investors or managers. They represent big pools of money such as investment banks, pension funds, mutual funds, hedge funds, endowment funds, etc. When they invest in stocks, they can invest hundreds of thousands of dollars or more at one time.


Regular investors pay attention to what institutional investors do because it is easy enough to assume that the big money managers know what they are doing -- or at the very least know more than the average investor. This is why these investors are also sometimes referred to as "smart money.” Note, investors should never blindly trust analysts or institutional investors or anybody else. Use information on institutional investing with other research before making any investing decisions.


Earnings before interest, taxes, depreciation and amortization (EBITDA)
This is an indicator of financial performance calculated as:  Revenue – Expenses (excluding tax, interest, depreciation and amortization). Usually it is used as a proxy for what is available to pay interest. It is useful to compare EBITDA to debt, as EBITDA is earnings available before paying off interest on debt.


Target Price 
Analyst target prices can be very useful guides for investors. The target price is a price level set by analysts that, based on their data and estimates, represents their predictions for that company in the upcoming year. Because analysts often have different opinions, we use the average analyst target price.
Although target price is upwardly biased, a steep discount from this number can indicate an undervalued opportunity.

Given the data points, do you think these companies are undervalued? Are institutions making the right moves? Use the list below as a starting-off point for your own analysis.



Analyze These Ideas (Tools Will Open In A New Window)
1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

1. Zumiez Inc. (ZUMZ): Services Industry. Market cap $797.63M. Net institutional shares purchased over the current quarter at 3.2M, representing 14.76% of the 21.68M share float. 3-year CAGR of free operating cash flow at 75.70%. Last year EBITDA at $53.76M vs. total debt at $0. Current price at $25.73 vs. target price at $30.88 (implies a potential upside of 20.02%).

2. Synaptics, Incorporated (SYNA): Technology Industry. Market cap $887.42M. Net institutional shares purchased over the current quarter at 4.3M, representing 12.66% of the 33.96M share float. 3-year CAGR of free operating cash flow at 72.34%. Last year EBITDA at $70.36M vs. total debt at $2.3M. Current price at $25.91 vs. target price at $32.68 (implies a potential upside of 26.14%).

3. Ebix, Inc. (EBIX): Technology Industry. Market cap $762.17M. Net institutional shares purchased over the current quarter at 3.7M, representing 10.87% of the 34.03M share float. 3-year CAGR of free operating cash flow at 56.61%. Last year EBITDA at $58.54M vs. total debt at $35.57M. Current price at $19.31 vs. target price at $29.50 (implies a potential upside of 52.77%).

4. LogMeIn, Inc. (LOGM): Technology Industry. Market cap $901.88M. Net institutional shares purchased over the current quarter at 2.0M, representing 9.81% of the 20.38M share float. 3-year CAGR of free operating cash flow at 165.17%. Last year EBITDA at $21.91M vs. total debt at $0. Current price at $37.5 vs. target price at $50.43 (implies a potential upside of 34.48%).

5. KongZhong Corporation (ADR) (KONG): Services Industry. Market cap $191.87M. Net institutional shares purchased over the current quarter at 530.4K, representing 9.4% of the 5.64M share float. 3-year CAGR of free operating cash flow at 159.85%. Last year EBITDA at $10.16M vs. total debt at $3.55M. Current price at $5.08 vs. target price at $10.00 (implies a potential upside of 96.85%).

6. Travelzoo Inc. (TZOO): Services Industry. Market cap $1108.25M. Net institutional shares purchased over the current quarter at 517.8K, representing 9.35% of the 5.54M share float. 3-year CAGR of free operating cash flow at 34.87%. Last year EBITDA at $25.86M vs. total debt at $0. Current price at $67.33 vs. target price at $109.40 (implies a potential upside of 62.48%).

7. OpenTable Inc. (OPEN): Technology Industry. Market cap $1943.46M. Net institutional shares purchased over the current quarter at 2.0M, representing 9.11% of the 21.95M share float. 3-year CAGR of free operating cash flow at 61.46%. Last year EBITDA at $25.48M vs. total debt at $0. Current price at $82.56 vs. target price at $104.70 (implies a potential upside of 26.82%).

8. LHC Group, Inc. (LHCG): Healthcare Industry. Market cap $440.8M. Net institutional shares purchased over the current quarter at 1.4M, representing 8.91% of the 15.72M share float. 3-year CAGR of free operating cash flow at 90.95%. Last year EBITDA at $103.15M vs. total debt at $0. Current price at $23.61 vs. target price at $28.70 (implies a potential upside of 21.56%).

9. AsiaInfo-Linkage, Inc. (ASIA): Technology Industry. Market cap $1245.54M. Net institutional shares purchased over the current quarter at 4.0M, representing 8.86% of the 45.15M share float. 3-year CAGR of free operating cash flow at 21.01%. Last year EBITDA at $84.95M vs. total debt at $0. Current price at $16.96 vs. target price at $26.92 (implies a potential upside of 58.72%).

10. ION Geophysical Corporation (IO): Energy Industry. Market cap $1533.94M. Net institutional shares purchased over the current quarter at 8.9M, representing 7.78% of the 114.35M share float. 3-year CAGR of free operating cash flow at 55.92%. Last year EBITDA at $180.43M vs. total debt at $108.66M. Current price at $9.89 vs. target price at $14.00 (implies a potential upside of 41.56%).

(List compiled by Becca Lipman)



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