Natural Alternatives International - NASDAQ:NAII

Hey guys!

I'm new to this community and new to investing in general! I've recently gotten sucked into the world of investing (particularly value investing) thanks in no small part to Buffett's Books/TIP. I have very little money invested/to invest, and while I would like a satisfactory return, I'm enjoying the learning process as much as the increase in worth!

All of that being said, I've been looking for companies to purchase and have been having a bit of a difficult time finding many great values (is the market riding a bit high? I've been monitoring the yield curves from the fed, and doesn't seem like they're ready to slow things down.). Tonight I used stock screener for the first time (I didn't know these things existed, but boy are they neat. Got the tip off from one of the early TIP episodes). I analyzed the data on a dozen or so companies and found one in particular that seemed like a good buy. I haven't read much of their financial reports yet, though that is on the docket for tonight after I finish this post.

Here is a link to the google finance summary:
<a href="https://www.google.com/finance?q=NASDAQ:NAII&ei=FQ8lWej-AobcjAG6-YOICA">https://www.google.com/finance?q=NASDAQ:NAII&ei=FQ8lWej-AobcjAG6-YOICA]&lt;/a&gt;

I came up with a intrinsic value of $12.11.
EPS: 1.72
P/E: 5.29
P/BV: 1.01
$0 Debt
Current Ratio: 4.56

I know the numbers don't tell the whole story, which is why I intend to continue reading, but I thought I'd put it out there, and see if I could learn a thing or two from some of you who are a bit further down the road.

Thanks!
-Isaac

Comments

  • HI Isaac,

    great to have you here in the forum. Some comments from me:
    1) According to morningstar, P/BW is 1.19 - not 1.01.

    2) What you wrote is totally right: The numbers do not tell even half the story. So before deciding on this company, you must do the hard work: Look at the companies, their products, their moat, their management, etc..
    This is 98 % of the work. Putting the numbers into the IV calculator is only the last simple step.

    3) Okey, but now let's only look at the numbers. There is one crucail thing you need to understand:
    You say that your IV is $12.11. Okey.
    But be sure to know what this means. I just checked and I get this IV value with a discount rate of about 2%.
    So when we say that the IV is $12.11 - that means that we think the stock is worth $12.11 assuming that we consider an annual return of 2% sufficient.
    Are you really happy with an annual return of 2% over the next 10 years? I surely am not.

    For this kind of stock - small cap, more or less stable, no dividend, margins okey but not fantastic, no debt - I would require a discount rate of about 10%.
    With this discount rate the intrinsic value is $5.5 - making the stock way overpriced.
    So before this stock does not drop by at least 50% I will not bother looking at the business in more detail.

    That said, I am extremely conservative. I (almost) always play it safe. I am only buying, if there is a huge margin of safety.
    For this stock the margin of safety is non-existing.

    Hope, that helps a little. you are on a good way.
    I also suggest to have a look at "The five rules of successful stock investing" from Pat Dorsey. This book taught me sooo much.

    Thanks

    Christoph
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