Filed Under:
Tickers in this Article: SKX, OXPS, GOOG, LOGI
If your search for the next great stock begins and ends with analyst opinions, you may want to reconsider your approach - the professional stock pickers don't always make the right call, nor do they always have great timing. Here's a look at three names earning relatively pessimistic opinions despite solid fundamentals. Eventually, if these companies keep doing what they're doing, the analytical community will have little choice but to change their tune.

IN PICTURES: 5 "New" Rules For Safe Investing

If the Shoe Fits
The last couple of quarters haven't exactly been kind to Skechers USA Inc. (NYSE:SKX), as the shoemaker has fallen short of per-share earnings estimates. For instance, as if the fourth quarter's EPS falling from 58 cents a year earlier to seven cents in 2010 wasn't bad enough, that seven cents was three cents shy of estimates.

On the flip side, with an average analyst rating of just below a 'hold' (a score of 3.4 on a scale of 1.0 to 5.0, where 1.0 is a strong buy and 5.0 is a strong sell), the gurus still don't seem to respect one simple fact - Skechers is still pretty profitable. And, trading at only 7.2 times trailing earnings, investors can be a little forgiving of moderately erratic income.

Doing All the Right Things
With an average opinion score of 3.2 on a scale of 1.0 to 5.0, good to bad, optionsXpress Holdings, Inc. (NASDAQ:OXPS) is clearly more of a 'sell' than a 'buy'. Yet, the bulk of the evidence suggests there's little reason for such doubt.

Not that they directly translate into earnings, but two data nuggets released in the last few weeks both better reflect the actual value of the company. The first one is January's trading and account metrics. Revenue bearing trades were 23% better in January than they were in December, and 7% higher than the prior January's. And, total account balances at the end of January were 16% higher than they were a year earlier, and 1% better than December's total.

The second layer of evidence that suggests optionsXpress is underestimated is that it was deemed the "2010 Broker of the Year" in a survey by The Options Insider. As was said, that in itself doesn't generate profits. It does, however, point to success at the brokerage business' biggest challenge - getting and keeping customers.

Keeping Good Company
To be fair, late fiscal 2009 and early 2010 (H1 of calendar 2009) were hairy, scary times for Logitech International (NASDAQ:LOGI). The company dipped into the red for a couple of quarters, losing $0.20 per share twice in a row. Since then, though, the company's earnings have been on the mend. In fact, this calendar year's earnings projection of $1.18 per share is 37% stronger than last year's 86 cents. Plus, with four earnings beats in the last six quarters, that forecast is easily plausible.

The thing is, many analysts don't 'do' turnaround stories like the one Logitech is telling right now. The current average analyst opinion? A mere 3.1 on a scale of 1.0 to 5.0, which is slightly on the 'sell' side of the table.

It's too bad too, as the pessimism doesn't reflect that forward-looking P/E of 16, nor does it respect the fact that Google (NASDAQ:GOOG) is bringing Logitech into the fold with its new interactive TV service. Google's next big thing will be using a Logitech-built set-top box.

It's not clear just how big Google TV will be, but with the big G involved, it's not apt to be small potatoes for Logitech.

The Bottom Line
Though no stock is without risk, these three stocks offer more reward than risk at this point ... even if analysts don't see it yet. Sometimes going against that grain and stepping into a value-oriented idea on your own can bear the most fruit of all. (For related reading, also check out Profiting From Panic Selling.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus

Trading Center