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Dr. Paul Price
Dr. Paul Price
Articles  | Author's Website |

A late 'Boxing Day' special -- Black Box (BBOX)

December 31, 2007 | About:

Black Box [NDQ: BBOX] Dec. 31, 2007 close: $36.17 Yield = 0.7%

52 week range: $34.57 - $46.40

BBOX provides technical networking services to businesses in North America, Europe and elsewhere [141 countries total] on a business-to-business basis. They also offer over 90,000 products through catalogs.

Sales and earnings for the FY ending March 31, 2008 should be nicely higher year-over-year. Consensus views are $3.12 and $3.66 for FY 2007 & 2008 although Value Line is more conservative at $2.95 and $3.25 respectively.

Even on VL's lower numbers these shares look quite cheap. Using the lower estimates BBOX is trading at under 12.3X this year's and just 11.1X next year's EPS. Their 10-year median P/E has been 19X and their most recent average annual P/E's for FY 2004 - 2006 were 21.9X, 19.9X and 20.9X.

If Black box shares trade back to just 18X next FY's earnings we could easily see a price of $58.50 or better for a capital gain of over 61%.

Two of our Gurus owned BBOX as of September 30. David Dreman and Ken Fischer held 522,500 and 541,312 shares. Other significant holders were FMR [Fidelity Funds] Dimensional Fund Advisors, AXA Financial and LSV Asset Management with 11.3%, 8.3%, 5.8% and 5.1% stakes.

Officers and Directors have faith, too, holding a combined 10.8% of all shares.

Value Line gives BBOX a B+ financial strength rating and a 90th percentile earnings predictability factor.

Risk? The absolute low prices touched in the turbulent markets of 2006 and 2007 were $35.70 and $34.57...not too far from today's price and with improving fundamentals.

Is a goal price of $58+ reasonable? BBOX shares hit peak prices of $50.40 - $73.30

at some point in each calendar year from 2001 - 2006 and were as high as $46.40 less than two months ago. With record revenues and earnings on tap, $55 - 60 looks pretty likely within 12 - 18 months.

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Dr. Paul Price


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