Tuesday, July 2, 2013

Research In Motion

On my other blog I am today writing about Economic Cycles...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.

Well, the stock price has recently dropped because RIM has had a loss of $84M in the first quarter. Analysts were busy revising estimates of this stock lately because of this. The problem is that they have had an earnings loss in the financial year ending in March 2013 and now another loss in the first quarter of 2014, ending in June 2013.

Some analysts expect that there will be an earnings loss in the financial year ending in March 2014 and other expect the company to have some earnings in financial year ending in March 2014. More analysts expect a loss for the financial year ending in March 2015 and then some earnings in the financial year ending in March 2016.

Revenue over the past 5 years and 10 years is up significantly, with growth at 13% and 44% per year, respectively. However, it is down from where it was in 2010 by some 44%. The 12 months revenues ending in the first quarter are up by only 2.3% from the last financial year. The average increase by analysts for this financial year is expected to be up by 12%.

People who have held this stock for 10 years have earned a total return of 9.2% per year. However, people who have only held this stock for 5 years have lost some 32.5% per year. The problem with this tech stock is that they have to keep coming up with successful new products all the time to do well.

Because this stock has had an earnings loss in the financial year ending in March 2013, the Return on Equity was negative also. However the 5 year median ROE is very good at 32%. I sort of doubt that it may have such high ROEs in the future.

As far as the balance sheet is considered, it has very good ratios. The Liquidity Ratio is at 2.07 and the Debt Ratio is at 3.56. Both are quite good. These good ratios probably mean that it can survive quite well adverse financial results, at least in the short term. The current Leverage and Debt/Equity Ratios are also quite good at 1.39 and 0.39.

I bought this stock when it was a fast rising growth stock and sold when it was not. I would not buy this tech stock now. See my spreadsheet at bb.htm.

This is the first of two parts. Second part will be posted on Wednesday, July 3rd and will be 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.

1 comment:

  1. I definitely agree on that.
    BBRY failed to notice that the market of old "small screen, physical keyboard" is dying and entered the market too late, for my taste.
    Also, as of 31/03 60% of the holdings are institutional and 15% more are the insiders. This numbers pose threat to the private investor since their movements will determine a long trend.
    Either BBRY invents a whole new market or it will perish indeed.