My Earning Season - INFN

INFN reported after the close. They had great results. Earnings up 100% from 11 cents to 22 cents. Trailing earnings of 69 cents, up 176% from 25 cents. Revenue up 34%. Operating margins of 14.4%, up 67% from 8.6%. Their PE is 26.5. You don’t get results much better than this!

Excluding AMZN which is doing its own thing, looking at the other four stocks that have reported (SKX, INBK, CNC, INFN), and which represent about 38.5% of my portfolio, their:

Average PE is 21
Average increase of this quarter’s earnings vs. the year-ago quarter is 62%
Average increase of 12-month trailing earnings vs. 12-month trailing earnings a year-ago is 108%

While that gives an average 1YPEG of 0.19, the fact that the average increase of this quarters earnings (62%) was less than the average increase of the 12- month trailing earnings (108%), would indicate that the earnings growth rate is slowing down (which is what you’d certainly expect, of course) and the increases in the 12-month trailing earnings will be lower in the future (which is what you’d expect, as well).

Here are the four stocks which had previously reported:

AMZN reported revenues up 23%. As I told you when I indicated I was starting a position in AMZN, there’s no point in trying to follow earnings. What I decided to follow was trailing 12-month operating cash flow per share (instead of trailing 12-month net earnings per share). I figured this was as close to a similar figure as I could get, and I do realize that it’s untaxed. Here’s what it looks like:

Mar 2014: 	        $11.12
Jun 2014: 	        $11.10
Sep 2014:		$11.87
Dec 2014:		$14.16
Mar 2015:		$16.23
Jun 2015:		$18.40
Sep 2014:	 	$20.04 

As you see, this quarter’s trailing value of $20.04 was up 69% from the $11.87 a year ago. Now I know that someone linked to a post by someone who felt that AMZN had no right to call it Cash Flow because they weren’t including and excluding the correct things. I really don’t care because as long as whatever they are measuring is up 69% from a year ago it’s going in the correct direction. Rapidly. (I can’t figure out what Amazon is doing anyway).

For those who care, the “PE” figured by dividing the close by the trailing op cash flow per share, is 30.4, which considering that it isn’t real earnings and is untaxed, is certainly high. Just saying. I’m not sure AMZN will ever be cheap. They are one of my smallest positions in the range of 1.5%

INBK will be quicker. Their earnings were 51 cents, up 82% from 28 cents a year ago, but a bit of a sequential slow down in growth rate from the last couple of quarters that grew over 100%. Trailing earnings are $1.79, up 118% from 82 cents a year ago. Their efficiency ratio was down (which is good) to 0.61 from 0.76 a year ago. The PE is about 17.6, which seems a little low for a company growing earnings at 118%.

With BOFI mostly gone, INBK is now my 3rd biggest position, in the range of 12%. Who would have thought it?

SKX has been discussed at length, but, for a quick summary: Revenue up 27%, I figured Earnings at 49 cents up 29% from 38 cents. I added back the short-term legal expenses but not the foreign exchange translation losses or the advance rent payments (which are real rent, after all, and now won’t come out of a future quarter). I figure their trailing earnings at $1.56 (feel free to disagree), which gives them a rate of growth of trailing earnings of 73% from 90 cents a year ago, and a PE of 20.4.

After the drop they are my second largest position in the range of 16.5%. I added a bunch on Friday at $29.88 and a tiny bit more today.

CNC’s merger with Health Net was just approved by both sets of stockholders. Their adjusted earnings were 84 cents, up 37% from 61 cents a year ago. Their revenue growth seems remarkable (without the big merger which takes effect next year). Here’s how I’ve recorded it (in billions). Note that those aren’t annual gains, they are sequential quarterly gains.

Mar 2014: 	        $3.4
Jun 2014: 	        $3.7
Sep 2014:		$4.2
Dec 2014:		$4.4
Mar 2015:		$4.8
Jun 2015:		$5.2
Sep 2014:		$5.8

Trailing earnings are $2.97, up 64% from $1.81 a year ago. PE is 19.5 which is obviously low for a company growing so fast and probably represents concern about the integration of the merger as well as worry about political risk. This is a small position for me, in the range of 1.5%.


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