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Varchild2008 (84.18)

Rocket Stock or Dud? The Scam-o-Tron in full swing...

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April 12, 2010 – Comments (1) | RELATED TICKERS: DWA

Instead of calling SCAM-O-BOT scares.... It's now SCAM-O-TRON for the relentless articles on Motley Fool that we get tearing down great American Namebrand Corporations for their success.

Is it anyone's surprise that Motley Fool's article writers lean left cause David/Tom Gardner do?

With that aside... Some interesting facts about DreamWorks Animation and the constant badgering of FORD Motor Company's success.

1)  The Author Rich Smith (TMF Ditty)  makes the following intelligent reasoning behind his choice of adding FORD on his list of DUD stocks going forward:

"Problem is, if the price goes up too much, even a great company can turn into a lousy investment. Below I list a few stocks that may have done just that. Stocks that, according to the smart folks at finviz.com, have more than doubled over the past year, and just might be ripe to fall back to earth."

Hmm no mention of FORD.... Not anywhere in the article.  Instead he attacks DreamWorks never bothers to get around answering for his other selections....  *sigh*

2)  And attacking Dreamworks Animation for what exactly?

"Why am I so down on DreamWorks? Last month, I wrote that "within the fetid swamp of overpriced equities that is the film industry, DreamWorks smells slightly less stinky than the moderately overpriced Disney"

Wow!!!   4 Earnings Beats by HUGE LONG SHOTS and Rich provides the stock with a "Slightly Less Stinky" rating????    Gee that makes sense....right......doesn't it???  oops...no I guess not.

"Why? Because it costs too much. It cost too darn much last month, and it still costs too much today."

What do you think this company sells?  Solar Panels?  This is a Film Industry Stock with a P/E well below the average of that sector that produces the BEST ANIMATED KIDS FILMS in the whole industry.

This is like getting Marvel Entertainment for 1/2 price compared to where they may end up in the next 5 years.    

Face it.. Dreamworks Animation has produced earnings reports in 2009 that show that they are producing ACCELERATED PEDAL to the METAL earnings that have nothing to do with their 5 year historical earnings growth pace.   These earnings deserve higher P/Es when they embarrass the heck out of the company's historical earnings levels.

"Over the six weeks since I first panned it, DreamWorks shares have already shed 10% of their value -- versus a 7% gain for the S&P 500. Yet even today, what we have in DreamWorks is a dividend-less stock, that costs in excess of 23 times earnings, sells for an even more frightening 35 times free cash flow, and yet is projected to grow at barely 16% per year over the next half decade."

So $2.66 per share CASH FLOW is skimpy??    Wait.... How in the heck do you get 35 times free cash flow here?

At $2.66 per share CASH FLOW   with ZERO DEBT to speak of RICH.....

I calculate that on my trusty Mechanical Calculator:  15 times earnings.... NOT 35!

The stock trades at 15 times cash flow and as this company's earnings go SKY HIGH off Shrek 4 sequal earnings.... Guess what?   If the stock sits at $40 or slips as RICH is hoping it falls....
Then the Multiple to Cash Flow will quickly drop below 10 and everyone and their brother, sister, mother, father, grandfather, grandmother, uncle, cousin, nephew, aunt, friend, coworker, and acquaintance will want to buy shares of DWA.

1 Comments – Post Your Own

#1) On June 23, 2010 at 1:17 PM, TMFDitty (99.59) wrote:

Pretty bold words for someone with sub-45% accuracy, V. ;)

 But here's hoping you are right. DWA is, after all, a Motley Fool Stock Advisor selection.

 TMFDitty

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