Here we go. There were only four votes, yet around 300 unique visitors in the time the poll was open. However, like many things in life if you don't take the chance to vote, you don't get a say in what happens. So I'm going to go through the process of buying a stock and describing the process to everyone. Here we go with Part 1: Research
Step 1: Log into your brokerage account. For me that is ShareBuilder. I chose it because it links to my ING Direct account, which used to have great interest rates. I also have a Fidelity Account.
Step 2: At the current moment I am into "net asset" value stocks, preferably Micro and Small Capitalization (Cap). So I go to Research > Find Investments > Investment Screener. Then I select on the Basics tab > Small and Micro. On the Fundamentals tab > P/E Ratio and Price to Book. We will pick a P/E Ratio of 0-15X and a Price to Book Ratio of 0-1X.
Since that gives us a huge list of 283 possible companies, and I am too lazy to go through them all we have to make the list smaller. Let us stick with only Small Cap stocks because I have a feeling some of my readers would be terrified to invest in a Micro Cap stock. Let us also add companies with a Debt to Total Cap ratio of less than 50% because a company with less debt is probably a good bet. We end up with:
That gives us a very manageable list of only nine companies.
|The List of Possible Value Companies
|Ruby Tuesday Stock Overview
Finally I click on the Financials tab. This is where the real meat of the kill is. They have only $10M in cash, but including property have a whopping $1.19B in assets. However, they have some significant long term debt and accrued expenses for liabilities of $595M. That means they have a book value of $592M. Thus the Price to Book ratio of .82. Additionally, the 52 week high is $14.48 and the 52 week low is $6.35. At a share price of $7.74 this looks like a good deal. However, the price to earnings ratio is 14.7 while the statistical 300 year average is 12.1 for large companies I believe. Plus, they did lose money the last quarter. Their stock price has been dropping over the last year, which often indicates that either the company is going bankrupt eventually, or set to go back up again. It seems that prior to 2007 the stock traded at $20-30 consistently. Again, that can be a good sign that it will likely rise again.
However, due to the high P/E ratio, recent Q2 loss of $0.03 per share, and my skepticism about Ruby Tuesday as a restaurant of choice and the overall American dining out prospects for 2012 I am not going to invest, but I will keep Ruby Tuesday in mind if I hear anything. Also to see if It goes up to $10 a share or something next month.
That is all for tonight. I've been typing for over an hour. Just because I research a stock doesn't mean that I have to buy it. Furthermore, for someone who better understands the restaurant business this might be a great investment. I would suggest this investment more than 90% of the companies out there based on the numbers that we looked at tonight.
Article finished 9:23 PM CST Wednesday February 1st, 2012.