Tuesday, March 2, 2010

Just bought shares of Tech Data, I suggest you do also (TECD)

Tech Data (TECD) shares are off 7% today, after giving disappointing revenue guidance for the coming quarter ending in April.

The company beat q4 2009 earnings by 24 cents, and sales came in higher than expected also. The selloff is due to an outlook for revenue to be up "mid single digits" in the coming quarter, while the street is looking for a gain of about 10% from 2009 levels.

The reason I'm buying a company with 1.5% net income margin is because the company's shares are dirt cheap.

The numbers are below. I exclude debt from my calculation of "net Market Value" because the company covered its interest payments a way-more-than-comfortable 20times over in the recent quarter.

I'm not looking for a premium price here, but the company's cash hoard makes up over half it's market value. If the company's Free Cash Flow Yield(FCFY) falls from the current 22% to a still far too juicy 17%, that's 15% upside for the stock. I think it should easily yield lower than that, pushing this stock up 25% or more.

Copyright 2010 AlphaNinja

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