Re:shooter~DHB...
Kp,
Sorry for not getting back sooner. After chat i was attempting to respond, was about half way thru it when my screen turned blue and i was getting all these error messages, LOL, basically my system crashed and burned!!.. i,m using my little 1 gig back up now as my main PC is being repaired. Turns out the fan burned out and PC was over heating, thus causing all kinds of system errors.
On DHB, i can understand the analysts lowering of estimates, like i stated before, there is a concern over A/R, way way up compared to sales growth. Not might be a big deal longer term though, as it might be a military contract,or contracts that the government has not paid due to their accounts payable schedule.But, also take note, there was a quality problem
in the past, and its possible that payment is being withheld for those reasons.
On the taking head side, and the analysts side of things, red flags appear when A/R or Inventories are rising faster then sales.These concerns often will lead to down grades on the street.And the common Joe investor should be concerned also.
And one should attempt to find out why these numbers are rising faster then sales.... never take this lightly!!
Rising inventories can be just a ramp up for a big sales push for a new product, or, it could mean, they are not moving the product out the door or suppliers are experiencing a slow down.
In this case, you could be looking at a earnings disappointment in the future. The same can be said for rising A/R,s....if they are risning faster then sales, it could mean a problem in quality OR... the customer is having a hard time financally... or perhaps the company is extending its time frame for payment due to slowing sales or rising inventories.
In either case the bottom line is a negative effect on cash flow.Plus in essence the company is giving out interest free loans on its products.
But i,m guessing at this point that estimates for DHB were lowered due to narrowing of gross margins, as there is some increased over head for some reasons.Perhaps its a one time event due to increased overtime for future sales, as the company is preparing to satisfy growing back log.
Overall i,m bullish on this company, as the product line is not only a military product, but also should do well in law enforcement arena.
My comment about the end of the war was not so much about the fundametals, the last huge contract win proves their sales are not being based on a very short term war.My concern was about market perception when the war ends.... which could lead to a buying opportunity.
When this stock was first brought up in BTS, ,my TA reading was a neutral with a bullish bias rating... which i believe is when you took a position.
I have now since took a neutral with a bearish bias rating as the stock is in a early stages of retracement, and could be topping out short term.And if so, key support levels should be paid attention to.SMA and EMA will come into play here, especially on the crossovers.... With the earnings due out next week, a lack luster one could stop the rally right in its tracks, and could spur selling thru key support levels,but a good one will more then likely give momentum to the rally.
Guidence if given will be key here.
On the FA side, i have to rate a hold with a bullish bias.
I like the contracts, the growing back log, and the industry as a whole. A low PE of 9 will do wonders if they can exhibit some EPS growth , and sales growth more then 15%.
Simply put, they grow earnings at a 50 % clip the next year, its gives you a forward looking PEG with PE of 9 of less then 0.20... undervalued by any industry measure.But i also want to see a increase in free cash flow.... from operations.And i will want to see gross margins improve also.
I like the company, just need to see some concerns answered.
Perhaps the next q or even the one after that will do that.
DHB is on my buy-watch list.
Lets see what the next Q says!!
Congrads on the win.... pretty dam good for 3 weeks!!
Shooter
