Blackberry (NASDAQ:BBRY) has been the subject of much speculation in recent months as the company struggles to restructure itself and recover its previous position in the market. In the news, we have seen both causes for concern and causes for hope as it pushes forward and tries to find a new position in an increasingly harsh market. This article will take a closer look at the pure numbers rather than the rumors and news in order to see what might lie in store for Blackberry in 2014.
With all the pessimism that has recently begun to surround the company, the general market has begun to lose confidence in the potential for future growth in the company. As a result, Blackberry has a price to book ratio of 1.287 which is just slightly above its historical ten year low.
This is a positive sign for the future of the stock because it indicates that it is currently being undervalued meaning that it would be a bargain purchase for anyone who chooses to invest now. The lower the expectations of the market, the easier it will be for the company to surpass those expectations. Should Blackberry manage to exceed the expectations of the market, it will regain confidence and result in faster growth of the stock.
- Warning! GuruFocus has detected 2 Warning Signs with BBRY. Click here to check it out.
- BBRY 15-Year Financial Data
- The intrinsic value of BBRY
- Peter Lynch Chart of BBRY
Another strong indicator that the company is currently being undervalued by the market is its price/earnings to growth ratio of 0.597. This ratio shows that the company’s actual growth may, in fact, be greater than investors realize. The further below one a company’s price/earnings to growth ratio is, the more likely that it is selling at a price below its true value.
The price was also boosted by about 6% in one day earlier this month after a report from the United States Department of Defense stated that Blackberry’s devices were still the most preffered phones of the government.
This boost comes as part of a general increase in the stock price over the past month. The stock hit its 52 week low of $5.44 in December of last year and since then has managed to nearly double in value to its current price of $9.89. Such dramatic is growth is certainly desirable for investors. What waits to be seen, however, is whether or not this upward momentum is sustainable.
There are, of course, also some causes for concern to be found in the numbers as well. For instance, the company’s cash flow from operations have been decreasing year over year meaning that its regular business operations such as selling products or providing services are earning them less and less money.
Amid the stagnation and decline of last year, Blackberry’s number of shares outstanding increased by about six million shares from 518.35 million on November 30th to 524.64 million on December 2nd. When a company begins to put more equity on offer, it can be interpreted as a sign of desperation in which the company is trying to make up for lost revenues.
Another sign of desperation comes with the news that Blackberry is planning to sell more than three million square feet of real estate holdings in Canada. Selling off assets in this way could be interpreted as an attempt to recover from decreasing earnings coming from its regular business operations. However, in Blackberry’s case, this could also be seen as part of a larger plan to restructure the company and increase its operating efficiency in the long term.
At this point in time, it is difficult to say for sure whether or not Blackberry is going to make it. The numbers tell almost as uncertain a story as the recent news coming out about the company. However, there are some good indicators that company is doing better than the general market believes, making the current price of the stock a bargain for those investors willing to take the risk. If it does recover, it will grow by leaps and bounds, providing fantastic returns for its investors. But one should not invest without understanding that they are making a relatively high risk investment.