PC Mall, Inc. (MALL)

floridabuilder (99.90) Submitted: 2/14/08 10:26 AM : Start Price: $10.54 MALL Score: 2.12

Fools (C)
0 top 200 fools like this stock which I consider a negative. The top 200 fools use various methods of finding new stocks on the long and short side. You are telling me none of them have found or like MALL? When I looked at fools that ended this pick, I found 1 top 200 fool who red thumbed and 1 top 200 fool that green thumbed. Both were in the green for CAPS. So I consider this a very risky pick for lesser fools, because it isn’t on the greater fool’s radar.

Technicals (C+)
First, look at the 50 and 200 weekly (not daily) moving averages. Stockcharts.com. As you can see for almost all of 2007 this stock was above the 200 weekly moving average and for a good portion of 2007 it rode right on top of this weekly moving average. The stock collapsed in Nov 2007 along with the market all the way down to $7 a share. In 2006, $7 a share was the ceiling for this stock, thus it makes sense that this stock pulled all the way back and found the previous year’s ceiling as its support. The stock has now risen just above its 200 weekly moving average again within the last 45 days. This is critical that it stay above this average and re-establish it as the floor (our entry point). A market meltdown could send this crashing again to $7 a share for a double bottom. However, there is risk with holding any stock in a market meltdown.

So why would I recommend a stock that plummeted recently and now just barely sits over its 200 weekly (again not daily) moving average? Fundamentals have suddenly changed

Fundamentals (A-)
Using my trusty database, let us look at sales growth projections first. Prior to 2/21/07 this stock had negative sales growth. From 2/21/07 to 11/2/07 its sales growth was in the low teens. Interestingly, the stock tanked hard with the rest of the market in Nov 2007, but at that time its sales growth rose to the high teens. On 2/11/08 the stock jumped again to a sales growth number of 38%. Earnings growth on this stock since March 2006 has almost always been in the 21% to 29% range with a couple pops over 29%. However, on 2/4/2008 the earnings growth rate went to 30% and then moved up to 33% on 2/11/2008. I think this is very important. MALL has always shown good earnings growth numbers, but its sales growth was lagging. Now it is showing strong sales growth and earnings growth is picking up. Today it trades at a p/e of 8.64 which I consider very low for a stock with this type of sales and earnings growth. Going back several years in my database this stock has always traded in the 14 p/e to 30 p/e range. So we are talking about a huge discount to recent history in addition to the acceleration of sales and earnings growth. At the bottom I discuss recent news events

Industry (C+)
MALL is in the retail – computers industry…. Which is currently ranked 113 of 192 industries. In looking at a 3 year graph of the retail – computers industry it looks lie a mountain range. It will spend 3 months in the valley of death (ranked in the bottom 20 industries) then shoot up to the top 20 industries, hang out for a while and then plummet back to the valley of death. In other words, this industry has shown no consistency over time. Looking at a 5 year graph, the average price of a stock in this industry has been virtually unchanged since late 2003. So although we are having peak and valley scenarios, overall the stocks aren’t moving higher. The only time this industry has shown significant appreciation in stock price and maintained itself as a top 20 industry was from March 2003 to January 2004. The average stock price in the industry group improved a whopping 131% in this stretch of time. It should be noted that currently the industry was in the bottom 20 and is now on its up-cycle. I predict it will peak in 2008 and then reverse down again. So lets make some money for 6 months shall we?

Who are the largest market cap stocks in the industry? Ingram Micro, Techdata, Scansource and Brightpoint. Exactly…. Who the F**K are these companies. I think this plays into why this is a peak and valley industry. Additionally, only 2 of the stocks in the industry group have a market cap over 1 billion. So the industry is under followed and does not carry a lot of weight on Wall Street.

What Do They Do? (B-)
Here is there website. Do your own research lazy a$$. Just kidding. Go check out there website and see if you think this is where you would want to buy computer crap. If it is then the stock is a good buy because it is making money and not some money losing web operation. http://www.pcmall.com/. They have other websites too like http://www.macmall.com/. Lets be honest Macs are hot.


News Items Since Jan 08 Lows (B+)
2/7 – PC Mall 4Q profit more than doubles and beats analysts expectations (AP)
well that was it…. They kicked butt on earnings and large sales growth…. The lack of news items (the last one of relevance was Oct 2007) might explain why many fools don’t know about the company. Read the 8k SEC filing for their earnings report. Here were the key items


Consolidated net sales for the quarter were a record $408.0 million, up 38% year-over-year.
   o    Commercial net sales for the quarter increased 42% year-over-year.
   o    Public sector net sales for the quarter increased 37% year-over-year.
   o    Consumer net sales for the quarter increased 21% year-over-year.
   •    Gross profit for the quarter was a record $47.9 million, up 41% year-over-year.
   •    Operating profit for the quarter was a record $8.7 million, up 131% year-over-year.
   •    Operating profit margin for the quarter was 2.1%, up 62% year-over-year.
   •    Net income for the quarter was $4.6 million, up 169% year-over-year.
   •    Diluted EPS for the quarter was $0.32 per share, up 146% year-over-year.


Next Earnings Date: They just reported

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