Tuesday, December 21, 2010

Gennum Corp

I had held this stock (TSX-GND) for about 8 years between 1998 and 2006. I sold it because I thought it was going nowhere. I did make a profit, but only of 5.5% per year. I did not think it would break out of its current band anytime soon, so I sold half of my shares. The stock price only went lower, so I sold the rest. I only made some money as I bought it at the low point in the band and sold half at the high point in the band. The second half of the sale was towards the low end of the band. Since then, the stock has not done well, and it has been hit hard by the latest recession.

If you look at a stock charts, you can see that this stock hit a peak in 1999 and the same peak in 2000. Since the stock pass $10 in 1998, it was in a $10 to $20 band until it broke the bottom band of $10 in 2008. Since that time, it has been in another band that runs just below $4 to just above $8. Since September, it has been around $7.00, so the price has just flattened out. No matter how you slice or dice this stock, no one would have made money on this stock in the last 5 or 10 years.

The other figures on the spreadsheet do not show anything any better. For example, the revenues under this company have had their ups and downs over the past 10 years, but have gone nowhere. Although in the first 9 months of 2010, the revenues are on par with those of the first 9 months of 2008. 2008 saw their best revenues yet. When you look at earnings, the figures are not much better. The expected earnings for 2010, will be little better than those 5 or 10 years ago. However, the earnings have also had their ups and downs over the past 10 year.

When you look at dividend growth, there has been some overall, but the last dividend increase was in 2006 and the one before that was in 2001. The current dividend yield of 2% is not bad, but the dividend yield has generally been below 2% and it has usually been below 1%. In other words, you will not make much in dividends on this stock.

It is expected that the cash flow will be positive in 2010. This is an improvement over 2009. However, the cash flow is not expected to be much above what it has achieved in the past. The book value growth has also been a bit mediocre. Over the past 5 years, it has grown at around 5% per year. The 10 year growth is better at around 8% per year. This last growth rate is decent.

Tomorrow, I will look at what the analysts say about this stock. One more thing to mention is that, since 2008, this company has reported in US$. This does complicate things for Canadian investors, but companies do this when the majority of their business is not Canadian.

Gennum Corporation designs innovative semiconductor solutions and intellectual property (IP) cores to serve the rising global demand for high-speed data transmission products in the broadcast, networking, storage and telecommunications markets. They sell in North America, Europe and Asia Pacific. Its web site is here Gennum. See my spreadsheet at gnd.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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