MCRS is a value play


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Posted by nonsenso on September 13, 19100 at 01:40:58:

Have a look at this contrarian play, a company that dropped >70% this year, but is profitable, healthy, and is a market leader in its industry.

Micros Systems Inc. (MCRS)

MCRS dropped from a high of 76 1/4 to 16 7/8 this week, and have fallen 76% this year.

MCRS designs, manufactures, markets and services point of sales and backoffice information solutions for the hospitality industry. Its customers include hotel chains and restaurants. Its clients include Mariott International, Radisson, Hilton International, Starwood Hotels, Inter Continental, Ramada Europe, Planet Hollywood, Burger King, Wendys, and Subway.

MCRS is the world leader in its market. Although the industry is highly competitive, MCRS' revenues are three times as big as the number two in this marketplace.

Here is some fundamental information (Source Bloomberg):

PE ratio: 16.07
Price/book: 1.73
price/sales: 0.81
price/cashflow: 5.72
price/free_cashf: 6.58

Operating margin: 14.6%
gross margin: 48.99%
ROE: 25.87
ROC: 22.50
Current ratio: 2.05
Debt/equity: 1.84%

The company has grown its earnings with 29.41% in the last five years, and is expected to to grow at a rate of 22% in the next 5 years.

The shares of this company dropped in response to bad earnings announcements, it announced a .45/share loss for the last quarter. The company announced it would not meet the estimated earnings for this year. The last quarter the company registered a loss was q2 1996. The main reason for the current loss seems to be y2k related, its customers made substantial investments in IT infrastructures in their y2k budgets, and are now deferring further investments.

In my opinion this company is a good value buy at current levels:

Standard and Poors puts a fair value of 36$ on the shares.

Ford Investment services puts a fair value of 38$ on the shares.

My own discounted cashflow analysis returns a fair value of 44$ at a 15% future growth projection, discounted with a bond rate of 5.9% and an additional risk rate of 4%.

Bloomberg DDM gives a fair value of 34.11 with a 15% growth rate and a bond rate of 5.9.

The current price is 16 7/8, which makes it in interesting value play, with growth potential.


5yr valuation levels:

high low current
PE 43.5 9.1 15.1
p/cf 55.6 7.5 7.5
p/bv 9 1.82 1.89
p/sls 3.62 0.84 0.84

The company is trading it its lowest price/sales and price to cashflow in the last 5 years. It is trading close to its 5yr low price/book value.


For more research information go to:

Insider trading information
http://www.insidertrading.com/freestuff/search.asp?search=1&criteria=mcrs

Hoovers company capsules
http://www.hoovers.com/co/capsule/8/0,2163,14118,00.html

Company filings
http://www.sec.gov/cgi-bin/srch-edgar?micros+systems

Micros systems website
http://www.micros.com/

fool.com discussion board about Micros systems inc.
http://boards.fool.com/Messages.asp?bid=105698

Multex research reports
http://multex.multexinvestor.com/tickersearch.asp?Process=1&Ticker=mcrs



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