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Webex Communications Leads The Market in Online Meeting Technology 05/05/2005
An email from a member asking for an opinion on WEBX prompted The Graham Investor to investigate this purveyor of browser-based Online Meeting technology. The member in question wanted to know why it was showing up in the screens despite only having a Graham Number (NCAV) of around $3.69. It's important to understand the different types of stocks Graham was looking at. He would look at the NCAV for "bargain issues". More often than not, these have low Market Capitalizations, typically less than $100M, but sometimes higher.
The Graham Investor's "shares in float" implementation of NCAV typically finds stocks up to about $250M, but sometimes higher.
For Growth Stocks, Graham would use Intrinsic Value. We tend to stick to Market Capitalizations over $250M for this type of stock, along with solid growth prospects and a low PEG value. This is where WEBX turned up. As our member astutely pointed out, WEBX clearly has future business, as they are trying to fill 113 positions.
WEBX is a potentially interesting play for various reasons: hiring, seemingly a niche market leader, low P/E for the type of industry. Other items of note: earnings estimates look good. Growth predicted at 25% p.a. over the next 5 yrs. Plenty of cash -- over $4/share -- in fact maybe too much; they will need to find something useful to do with it soon. There is great cash flow from operations. RoE (a sign of management effectiveness) is high at 22%, and the low PEG implies that WEBX is undervalued going forward.
On this basis, the Graham Iinvestor believes an intrinsic value of $36.83 is pretty fair, and interestingly, WEBX has been upgraded very recently -- including by a firm that downgraded it in October last year.
Technically, if one draws a trendline across the highs of the recent downtrend (starting in October), one might find that WEBX is possibly just starting to break above that trend. It really needs to do so with a little more conviction and a lot more volume than we've been seeing of late.
For Growth Stocks, Graham would use Intrinsic Value. We tend to stick to Market Capitalizations over $250M for this type of stock, along with solid growth prospects and a low PEG value. This is where WEBX turned up. As our member astutely pointed out, WEBX clearly has future business, as they are trying to fill 113 positions.
WEBX is a potentially interesting play for various reasons: hiring, seemingly a niche market leader, low P/E for the type of industry. Other items of note: earnings estimates look good. Growth predicted at 25% p.a. over the next 5 yrs. Plenty of cash -- over $4/share -- in fact maybe too much; they will need to find something useful to do with it soon. There is great cash flow from operations. RoE (a sign of management effectiveness) is high at 22%, and the low PEG implies that WEBX is undervalued going forward.
On this basis, the Graham Iinvestor believes an intrinsic value of $36.83 is pretty fair, and interestingly, WEBX has been upgraded very recently -- including by a firm that downgraded it in October last year.
Technically, if one draws a trendline across the highs of the recent downtrend (starting in October), one might find that WEBX is possibly just starting to break above that trend. It really needs to do so with a little more conviction and a lot more volume than we've been seeing of late.