Sun Microsystems undervalued, says Valuecruncher
Posted
Jul 31 2008, 12:54 PM
by
Kim Peterson
Rating:
Shares of server maker Sun Microsystems are up 4% today, a day before the company reports its fourth-quarter results. Sun gave investors a gloomy peek at the news earlier this month, saying that it would miss its own guidance on sales and that profit would be 25 cents to 35 cents a share. If you include restructuring charges -- which the Street likes to do -- profit is more like 20 cents a share.
Analysts turned quickly on the company, according to Barron's, expressing disappointment with margins and with ongoing restructuring charges. But Valuecruncher has run some numbers on the stock and comes back more optimistic about Sun's value.
Sun's revenues had a 7.4% compound annual growth rate from 2004 to 2007, Valuecruncher says. The site assumes a modest 2.6% compound growth rate going forward, and flat margins of 10%. It puts the WACC discount rate at 12% and looks at the cash and debt situation.
In all, Valuecruncher says it values Sun at $11.64 a share. Company shares are trading today at $10.80.
