SUPERMAX – Wizard Of Ratios
Last few days I wrote about SUPERMX a lot, more than I should, since I don’t hold even a single share. But I can’t help myself, I am obsessed with their financials. It is not very often to find some stock with such great ratios, once in a lifetime maybe as the same goes for a pandemic (hopefully).
When I was writing article about PEG Ratio (see links at the bottom) I was thinking about to show some examples on a real stock (I end up not using any). I had on my mind TOMEI and SUPERMX, both are great examples of “strong numbers” and there is a lot of unknown variables for the future earnings growth to fill up the PEG formula, with TOMEI more predictable but less impressive numbers. SUPERMX right now showing almost all ratios in a great range (well, some items are not so optimal), but the biggest problem here is to guess earnings yield. Actually, it is all about it and nothing else! If somebody decide to invest based on any traditional formulas used for “value investment” SUPERMX is winner in every aspect, yet its market price is far from where it should be, all because of the unsure future of EPS.
But as I said, I can’t stop thinking about it and tried to put some possible scenarios:
1] Optimistic – Scenario A
Covid infections will be the same or even increasing and at the same time vaccination drive will increase, both which will result in increase demand for gloves. Expected growth 25%
2] Slightly optimistic – Scenario B
Covid infections will be decreasing slowly, but increased vaccination drive will drive demand for gloves. Expected growth 10%
3] Neutral – Scenario C
Covid infections will be decreasing exponentially, but at the same time will increase vaccination drive, resulting in stable demand for gloves. No growth 0%
4] Slightly negative – Scenario D
Covid infections will be decreasing, vaccinations slowly progress, glove supply increase from competition etc, resulting in less demand and lower prices. Growth -20%
5] Negative – Scenario E
Gloves everywhere, demand going down, prices falling. Growth -50%
6] The worst - Scenario F
Back to pre-pandemic. Growth -80%
Right now SUPERMX has trailing P/E Ratio of 2.56, it means theoretically it needs to growth earnings by at least 2.56% to keep PEG Ratio below 1. So it is up to B- from the above scenarios, with both A and B showing astronomic potential, A go to the Mars, B go to the Moon, slightly above 0 its still good. Should the earnings growth be positive at least somehow in the future, it should definitely adjust to a fair valuation based on P/E of at least 7. I leave it on you, to fill up your own numbers and proceed with calculation of the fair value.
Conclusion: SUPERMX is a perfect candidate to use PEG Ratio and not depend on P/E only.
As I said, this is a very speculative subject and that’s why I love to think and play around with these numbers. Wild fantasy, almost magic!
About P/E ratio read HERE.
PEG Ratio explained is HERE.
GLOVES Still Alive And Well HERE.
GLOVES - Simple Table Comparison HERE.
TOMEI read HERE.
Read more on my blog: https://miloshtrading.blogspot.com