XWG: $6.15 and reports next week. No earnings run yet. I think this one should do well. It has been oversold and never fully recovered on loss of major customer back in November. Gap has not been filled from that fall and there have been some significant ditribution agreements signed since then. Compare to FORD.
From a yahoo post several weeks ago so take it FWIW but.....
Earnings, Sanyo and other good notes!
by: astar23 04/19/06 05:43 pm
Msg: 7404 of 7415
I just spoke with Dan Kenderdine at XWG.
Earnings are tentatively to be released May 2nd. There will be a press release about a week before the release when the date is solid.
I spoke with him about the Sanyo contract. He confirmed that all of the Sanyo accessories sold by Target will be supplied by XWG under their latest contract with Sanyo.
If you go to Target you will be extremely impressed by the size and scope of the display of Sanyo products. An entire aisle with accessories for the various brands is on display, and the accessories Target offers are almost exclusively Sanyo. In my opinion this contract is going to be huge.
The contract just kicked in last month, so don't expect to see it show up on the bottom line yet. All of the manufacturing and packaging is occurring in China, as opposed to shipping to the U.S. for packaging, so the cost to XWG is very favorable.
Dan also said that the four new retailers signed up last October with over 400 stores among them have recently opened up another 35 stores and that sales were going well with these retailers.
Because of the quiet period Dan cannot comment on the 1st quarter results, but he did tell another person last Friday that he feels the stock is undervalued.
Finally, I want to make a comment about the impact to the bottom line of projected sales increases this year.
There has been some disappointment expressed about the fact that Rade projected a 25% increase in sales this year. Some have speculated that this would result in relatively flat earnings after the impact of taxes which did not impact all of last year's earnings.
The fact is, the increased sales come with a very small increase in operating expenses. Note, for instance, that last year sales increased 44% over the previous year, while net income increased 102% in spite of being taxed in part for the first time. That's because selling general and administrative expenses only increased by 5.6% in order to realize those gains in sales.
Rade has stated he expects selling expenses to increase by no more than 5% this year. If we project a 25% increase in sales, this means an 83% in net profit increase before taxes, assuming margins stay at around 38%. It results in about a 65% increase in income after taxes (@73 cents per share), which is amazing since last year was only partially taxed.
A company increasing earnings at 65% should be selling at at least 25x trailing earnings (arguably a lot more). This thing could be worth $20 or more next year.
While it is possible margins will erode, Rade seems to think not because of the incentives to sales personnel to sell higher margin items. I also personally believe Rade is conservative in his 25% increase outlook because of what happened last year with the lost customer. Sales last year were up 44% over the previous year, after all, even with the loss of the customer, and there were not nearly as many significant contracts signed.
The downside risk at this point is almost nonexistent, while the upside is huge, with a possible 3 or 4-bagger in store over the next year or so. I think this next couple of weeks will be the last chance to get in under 7. If not, I will continue to buy unless the fundamentals change in a significant way.
AI
