quote:
That's the thing. Revs were way up, but so were expenses, so net income was below expectations, causing earnings to miss. The stock was sold off by traders playing it strictly for earnings, as most thought they would beat.

Crazy. Those people must not spend much time at all looking at the filings, their GP% shrunk less than a third of a percent.

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Many think earnings are everything, and they are a lot, but when earnings are only down due to a one-time expense, there's no need to hit the panic button, especially when revs have increased and their sales are projected to increase at a rate of 33% for each store they have (including the 9 new ones).

I always get the impression that people don't give a hoot about anything but the top-line. Maybe the reactions are different for small caps like this, I admit I don't follow any small-caps right now. The funny thing is I would expect it to be the other way around (less emphasis on revs for big companies, more emphasis for companies like this still working off their start-up capital) ETAA: I didn' realize this company had existed for like 20 years, how are they rocking such a large RE deficit?

It's a ridiculously well-capitalized company, but the earnings adjustment looks to be a product of either an artificially low tax expense last quarter, or an artificially high tax expense this quarter (ETA: I'm just looking at the first table in the Q that only has the two recent quarters). Simply based on book tax, I'd think it was the former, unless they're somehow managing to pay a 14% tax rate every quarter. I wish I had more time to look at it as a whole (or had more money so I wouldn't care as much), it looks promising between rev growth and the capitalization.

This post was edited on 4/14/10 at 5:27 pm

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Posted by RedStickBR

Member since Sep 2009

14577 posts

Posted on 4/14/10 at 6:05 pm to kfizzle85

quote:
Crazy. Those people must not spend much time at all looking at the filings, their GP% shrunk less than a third of a percent.

For traders, earnings are everything as they aren't interested in the longer-term. And for a stock priced under 5 dollars, there are going to be a lot of traders, especially after the monstrous uptrend the stock has seen.

Also, EPS are where most people come up with their valuations. EPS x A Fair P/E Ratio = the price at which you think the security should be trading. I know very few people who in real-life application use revenues in order to come up with an equity's fair value, at least not directly. They use them indirectly in coming up with a fair projected income, and thus a fair EPS, but earnings are at the very core of the analysis.

I'm playing this one differently than I'd play most others as this one is a BAH for me, so I do care about revenues and their relation to earnings.

quote:
It's a ridiculously well-capitalized company, but the earnings adjustment looks to be a product of either an artificially low tax expense last quarter, or an artificially high tax expense this quarter (ETA: I'm just looking at the first table in the Q that only has the two recent quarters). Simply based on book tax, I'd think it was the former, unless they're somehow managing to pay a 14% tax rate every quarter. I wish I had more time to look at it as a whole (or had more money so I wouldn't care as much), it looks promising between rev growth and the capitalization.

This is funny as I'm shocked you were able to come to this presumption without having read their filings. The correct answer re: your tax assessments is BOTH. In Q4'09, the company reversed their valuation allowance which resulted in them recording a significant, one-time income tax benefit, which in turn resulted in EPS of .40. Real EPS were around .05 w/ the one-time tax benefit taken out.

This quarter, they had an artificially high tax expense (around 48%). Unfortunately, it appears they will retain this rate throughout the year. As I understand it, when companies are expanding rapidly like JOEZ is, their tax rates are hiked way up. Sometimes it lasts only a quarter, sometimes the entire fiscal year. I'm guessing since we're expected to continue the rapid expansion, we must retain the artificially high rate. Still, though, with the revs way up and one-time expenses now accounted for, we should still be golden for the rest of the year. Also, the company is cyclical with a greater amount of profits being realized towards the end of the year.

Question: Who do you use for your one-stop financial data source? Most outlets have JOEZ last quarter earnings readjusted to .05. Surprised you even knew about the non-tax adjusted earnings.

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