Originally Posted by
Mr. Widget
You guys are all missing the point.
The stock market is simply a poor metric for the health, well being, and prosperity of a company.
Not so.
Market valuations are the collective of millions and millions of investors - ideally all knowing the same information (thanks to SEC oversight). Valuations discount future prospects of a company/business plan. The current valuation of HAR comprises things revealed in it's current financials:
- deteriorating balance sheet (non-current liabilities increased 179%, largely due to that $400 million convert they issued).
- weak net-income (interest expense increased 5.8x y/y)
- weak cash-flows (guessing - their 10K is not released yet)
HAR had a +16% increase to top-line but reported -50% eps ($2.35 vs $4.14 y/y), and management continues to remind:
“We experienced another year of strong revenue growth in fiscal 2008, but our focus continues to be on execution and operational excellence to improve the bottom line,” said Dinesh Paliwal, Chairman and Chief Executive Officer. “We have strengthened our executive management team and we’ve taken aggressive actions to improve our cost base and global competitiveness. This includes changes to our manufacturing footprint, procurement, technology portfolio, and talent management. We are not satisfied with our earnings performance, but we are confident the actions we are taking will position Harman International to achieve strong results long-term.”
Their automotive segment now comprises 24% of sales, down from 33%, as auto sales worldwide are struggling with cost-of-living increases we all face. Worse, the earnings reveal they are cutting pricing to drive sales: Segment earnings dropped from 10.9% to 5.1% of the Group. Yikes. That's called "stuffing the channel" and suggests their revenues might have been fluffed by this for 4Q, to "make the Quarter".
Interesting - their Professional segment sales increased from 39% to 41% of Group, with contributions to income of 19.6% (up from 16.3%). That's good to see. Maybe Pro will not be allowed to die at the expense of consumer crap.