TradeStation Group, Inc. [NDQ:TRAD] Jan. 31 opening price: $10.87
52-week range: $9.41 - $14.87
TradeStation is a provider of a proprietary trading platform [the TRADESTATION] for sophisticated investors in equities, FOREX, options etc. They serve both the professional and the retail ends of their market. Their platform and services have been top-rated by Barrons and others in terms of both features and pricing versus their competition.
TradeStation turned profitable in 2002 and has posted large year-over-year increases in EPS ever since. Sequential EPS results were:
2002: $0.02
2003: $0.27
2004: $0.33
2005: $0.48
2006: $0.67
2007: $0.79 [with a 4Q $0.21 estimate]
Consensus results for 2008 are expected to come in at $0.88 for their seventh straight year of record earnings. Revenue and book value growth have paralleled the earnings increases.
TRAD has zero debt [neither short-term nor long-term] and cash has been building nicely.
As of June 30, 2007 they held $89.1MM or about $2/share in treasury cash.
Today's volatile markets have been beneficial to TradeStation. Client trading was up 55% in November and 44% in December on a year-over-year basis. January trading volumes should also show big gains versus year ago levels.
Many savvy investors hold large stakes in TradeStation:
[as of September 30, 2007]
FMR [Fidelity Funds] held 7.28%
Royce & Associates held 5.44%
Barclay's Global Inv. held 4.05%
MFC Global Inv. held 3.31%
Putnam Inv. Mgt. held 3.16%
Skyline Asset Mgt. held 2.66%
Dimensional Fund Adv. held 2.38%
Renaissance Group LLC held 2.00%
Kennedy Cap. Mgt. held 1.98%
Skystone Advisors held 1.91%
TradeStation is a confirmed 'growth stock' at a non-growth valuation. TRAD shares are only 13.8X last year's and 12.4X projected 2008 earnings. In the four years 2003 - 2006 their shares sported an average P/E of 21.7X. The only sub-20 P/E in those years came in 2005 when TRAD had an average P/E of 18X.
Even an 18 multiple on this year's EPS estmate leads to a target price of $15.84 or up 44% by year-end. A more optimistic 20 multiple could see these shares at $17.60 or plus 60%. Crazy? Nope... TRAD actually hit $17.81 in Jan-Feb of 2006 on trailing EPS of $0.48 [from 2005]. They touched $13.75 way back in 2003 in a year when they had full-year earnings of $0.27/share.
Risk? With no debt, cash in the till and fast growing earnings I don't see much downside here. The absolute low prices in the 2006 - 2007 panic markets were $11.11 and $9.41.
NOTE: Unlike many companies, TradeStation has not given in to employee stock option craziness. Shares outstanding were 44.55 MM in 2001 and were 44.27 MM as of June 30, 2007.
Disclosure: I own shares of TRAD currently.
52-week range: $9.41 - $14.87
TradeStation is a provider of a proprietary trading platform [the TRADESTATION] for sophisticated investors in equities, FOREX, options etc. They serve both the professional and the retail ends of their market. Their platform and services have been top-rated by Barrons and others in terms of both features and pricing versus their competition.
TradeStation turned profitable in 2002 and has posted large year-over-year increases in EPS ever since. Sequential EPS results were:
2002: $0.02
2003: $0.27
2004: $0.33
2005: $0.48
2006: $0.67
2007: $0.79 [with a 4Q $0.21 estimate]
Consensus results for 2008 are expected to come in at $0.88 for their seventh straight year of record earnings. Revenue and book value growth have paralleled the earnings increases.
TRAD has zero debt [neither short-term nor long-term] and cash has been building nicely.
As of June 30, 2007 they held $89.1MM or about $2/share in treasury cash.
Today's volatile markets have been beneficial to TradeStation. Client trading was up 55% in November and 44% in December on a year-over-year basis. January trading volumes should also show big gains versus year ago levels.
Many savvy investors hold large stakes in TradeStation:
[as of September 30, 2007]
FMR [Fidelity Funds] held 7.28%
Royce & Associates held 5.44%
Barclay's Global Inv. held 4.05%
MFC Global Inv. held 3.31%
Putnam Inv. Mgt. held 3.16%
Skyline Asset Mgt. held 2.66%
Dimensional Fund Adv. held 2.38%
Renaissance Group LLC held 2.00%
Kennedy Cap. Mgt. held 1.98%
Skystone Advisors held 1.91%
TradeStation is a confirmed 'growth stock' at a non-growth valuation. TRAD shares are only 13.8X last year's and 12.4X projected 2008 earnings. In the four years 2003 - 2006 their shares sported an average P/E of 21.7X. The only sub-20 P/E in those years came in 2005 when TRAD had an average P/E of 18X.
Even an 18 multiple on this year's EPS estmate leads to a target price of $15.84 or up 44% by year-end. A more optimistic 20 multiple could see these shares at $17.60 or plus 60%. Crazy? Nope... TRAD actually hit $17.81 in Jan-Feb of 2006 on trailing EPS of $0.48 [from 2005]. They touched $13.75 way back in 2003 in a year when they had full-year earnings of $0.27/share.
Risk? With no debt, cash in the till and fast growing earnings I don't see much downside here. The absolute low prices in the 2006 - 2007 panic markets were $11.11 and $9.41.
NOTE: Unlike many companies, TradeStation has not given in to employee stock option craziness. Shares outstanding were 44.55 MM in 2001 and were 44.27 MM as of June 30, 2007.
Disclosure: I own shares of TRAD currently.
