NEW YORK – It has been a rough couple of months for stocks of Internet consulting companies. Former stars like Razorfish now trade at a fraction of their 52-week highs.
“The fourth quarter is not going to be an easy one for this group of stocks either,” warns Steven Birer, senior e-services analyst at Robertson Stephens.
Robert St. Jean, Internet and information technology services analyst at J.P. Morgan, points to several sector difficulties, including a drop-off in information technology spending by both dot-com and legacy companies, heavy staff turnover brought on by underwater stock options, and pressure to reduce fees. “When that sense of urgency goes away,” St. Jean notes,” clients tend to be a little more price sensitive.”
St. Jean thinks that the industry’s problems are short term in nature and will be offset by new demands, notably the development and implementation of wireless technologies.
Full story at Forbes.com
Posted by Gillies on October 19, 2000
NEW YORK – Within the past 12 months General Mills anted up $10.5 billion to buy Diageo’s Pillsbury food unit, European food and consumer products giant Unilever spent $21 billion to gobble up Bestfoods, and Philip Morris dropped $15 billion for Nabisco.
What’s going on here?
“To stay competitive in the food business, you need a broad array of market-leading products in growing, on-trend categories,” says Romitha Mally, packaged foods analyst at Goldman Sachs. “Size gives a company muscle with retailers,” adds David Nelson of Credit Suisse First Boston.
The enterprise multiple is a good guideline for what acquirers pay for food companies. The enterprise value of a company–the market value plus total debt and the liquidation value of preferred stocks minus cash and equivalents–represents the minimum price an acquiring firm must pay to buy another publicly traded company. The enterprise multiple is the ratio of enterprise value to a company’s operating income, or earnings before interest, taxes, depreciation and amortization.
Unilever (nyse: UN – news – people), for example, paid an enterprise multiple of 14 for Bestfoods (nyse: BFO – news – people). Using that deal as a guideline, we sought out food companies with enterprise multiples of 14 or less. All the companies on our list are profitable, trade below their 52-week highs, carry estimated 2001 price-to-earnings ratios below 22 and have projected three- to five-year earnings growth of 10% or higher.
Full story at Forbes.com
Posted by Gillies on October 5, 2000