CRTO – May 2015 Portfolio Review #5

Investment Analysis Clubs Saul’s Investing Discussions
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CRTO – May 2015 Portfolio Review #5

I took a position in CTRO about five months ago after a great series of three articles by Anirban. Before that they were a MF SA recommendation in July, but I read right past it. I paid between $37.50 and $40.50. At Friday’s close it was $42.75. CRTO has grown to be my fourth largest position. It has recently passed CELG as I have continually added small amounts to my CRTO position.

I wouldn’t dream of trying to do a thorough summary on this stock as Anirban has done it so much better than I could. I think the best thing for you to do would be to read Anirban’s write-up, which he reposted within the past week or ten days.

However, here’s a summary of their Revenue over the past two and a half years, in millions of Euros (this started as a French company, although a large amount of their business is now in the US and Asia):

2012: xxx xxx xxx 087
2013: 095 099 114 136
2014: 153 165 194 233
2015: 262

As you can see the last four quarters revenue of $854 million is up 70% from the previous four quarters, which totaled $502 million.

Adjusted EPS over the same quarters (in Euro cents) have been:

2012: xx xx xx-07 = 09
2013: 04-09 12 13 = 20
2014: 12 09 27 37 = 85
2015: 28…
…so these most recent earnings of 28 euro cents are up 133% from 12 euro cents a year ago.

Trailing 12 month earnings quarter by quarter in euros look like this:

Dec 2013 = 20 cents
Mar 2014 = 28 cents
Jun 2014 = 46 cents
Sep 2014 = 61 cents
Dec 2014 = 85 cents
Mar 2015 = 101 cents

Current trailing earnings are 1.01 euros. (In dollars, that’s trailing earnings of roughly $1.12.). That’s up from trailing earnings of 28 euro cents in the previous four quarters. Thus, in the past year, trailing earnings have gone up by 261%, and in the last five quarters, trailing earnings have quintupled.

CRTO’s PE is Fridays close of $42.30 divided by trailing earnings of $1.12 (we have to use dollars of course here, as the price is in dollars), for a PE of 37.8.

The rate of growth of trailing earnings, as we just saw is 261%, so the 1YPEG is incredibly low at 0.145.

I’m very happy with my position in this stock.

Saul

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Saul;

Thank u very much for the port review. This series of port reviews are among the most convincing and helpful posts I have read in TMF recently.

Now specific to CRTO, it seems to me the stock price movement and the reaction to its strong earning reports are kind of puzzling. The stock deserves a high valuation based on its growth. The street doesn’t seem to understand it. In comparison with another stock that released earning this morning-SALE, SALE’s growth is minuscule but the stock went up 20%.

Is it because it is a French company or the currency, or maybe they are competing with the big guns like Google?

This one puzzles me.

Regards

-M

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Saul, have you been trimming back on Celgene?

Neil

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Is it because it is a French company or the currency, or maybe they are competing with the big guns like Google?

I think it is human nature to ask questions of why stock prices move. This can’t always be explained nor can we be certain of a cause and effect relationship. The best approach is to have confidence in your own assessment while maintaining a flexible mind to alter your view as new information becomes available.

Chris

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Saul, have you been trimming back on Celgene?

hi again Neil, I may have trimmed CELG a little, but the primary reason CRTO moved ahead of it was that CELG fell in price and I’ve been adding to CRTO. I still have an 8.5% position in CELG and it’s in 5th place.

I did sell out of my position in FB though to redeploy the money in INBK, BOFI, SWKS and CRTO.

Saul

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I
think it is human nature to ask questions of why stock prices move.

Very true. But here I noticed a pattern. The same happened after q4 2014 earning release.

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Even in the age of the internet there is always the thought that there is something you don’t know, or don’t understand, that is driving the price down. I am especially bad about getting sucked into that way of thinking because, before the age of the internet, going way back to the 80’s I did get slammed more than once, because the bad news seemed to find it’s way to the professional investors days before us retail shmucks
knew about it. After the stock collapsed 30 percent you would learn, when the quarterly report showed up in the mail two weeks later, that same store sales had also collapsed, etc. Or buried in the annual report was some debt instrument that you didn’t understand that put earnings at risk, etc. That is why I love the boards at the Fool, because there are a lot of eyes looking and we have such quick access to information.
So yes I think it is human nature to be a little fearful when things start going south, but easier today to find knowledge, and support. Now I have to fight the, also human tendency, to believe what I want to believe, when I read it, or hear it. So it just goes on and on. LOL.

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Yesterday the entire market was down 1-2%, so I don’t think the earnings release caught on as much as it could have. Today CRTO closed up almost 4% ($45.15), and the market was mixed or partly down another 1% or so (across my holdings anyway), so things just need time to catch up.

It is a niche area, though, and may not be as well understood unless you take the time to research (and definitely find Anirban’s multi-part explanation!).

/me bought in at $30.50 and just wishes he’d bought more!