Research In Motion 2

My friend Marvyne is having an Art Show starting July 3rd in Toronto. ...continue...

I do not own this stock Research In Motion (TSX-BB, NASDAQ-BBRY), but I used to. I bought this stock in 1999 and sold some in 2006 and 2007 and the remaining in 2010. I earned 20% per year.

When I look at insider trading, I find 1.8M of insider selling and net insider selling of $1.6M. Insider buying is at $0.2M. The CEO has shares worth $1M and has options worth $16M. The CFO has shares worth $0.2M and has options worth $4.5M. Officers and directors have few if any options. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings Ratios are 7.37, 15.44 and 20.76. The P/E ratios peaked in 2008 at around 39.00 and have been falling ever since. The current P/E is at 44.00 based on 2014 earnings of $0.24 and a stock price of $10.39 CDN$. Earnings peaked in 2011 at $6.34 US$. (The next financial year ends in March 2014.)

I get a current Graham Price of $9.76. The 10 year low, median and high median Price/Graham Price Ratios are 1.34, 2.99 and 4.63. So a P/GP Ratio of 1.06 is good. However, also note that the Graham Price peaked in 2011 at $48.77. On growth companies, the P/GP Ratios tend to be on the high side.

The 10 year median Price/Book Value Ratio is 5.30 and the current P/B Ratio is 0.56. First a P/B Ratio under 1.00 says the stock is cheap. The other thing is that the current P/B Ratio is only 11% of the 10 year median. Theoretically, the book value is the breakup value. But book values can melt away when a company gets into financial difficulties.

When I look at analysts' recommendations, I find that they are all over the place. There are Strong Buy, Buy, Hold, Underperform and Sell recommendations on this stock. The consensus recommendation will be a Hold. The 12 month consensus stock price is $9.88 US$. This is only 2.3% higher than todays' US$ stock price.

Some analysts are looking at cash (around $3.00) per share and value of patents and think that the current price is a bit below this. Again cash can melt away if a company gets into financial difficulties. And values of patents are only estimates on what patents the company is thought to have and what others might pay for them. However, this is not a bad way of looking at this stock.

This recent report talks about the recent slide in RIM's stock. Market Watch talks about the recent disappointing first quarterly report from RIM.

However, my opinion is that it does not matter what the price of this stock is, what matters is that they come up with a new profitable product or products. If they do not, this stock will go nowhere. See my spreadsheet at bb.htm.

This is the second of two parts. The first part was posted on xxx and is available here.

Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, internet and intranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific. Its web site is here RIM.

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 or StockTwits.