Tuesday, October 03, 2006

ColorPak Ltd - Buying Opportunity

Just been doing some research into finding a few more stocks to consider. It is so hard finding good stocks in the currently overpriced market.

One which did stand up and was noticed was Colorpak Ltd ( ASX:CKL)

Do not worry about the downturn in earnings this year as this was due to one off costs. If you look at the sales growth over a number of years it is phenominal.

The graph is in a slight downtrend but seems to be steadying at the current price.

All of the ratios are looking good, PE, PB, PEG, Divi yeild. The only one of slight concern is debt to equity which is sitting at 66%.

The payout ratio is small which means dividends could be increased in the future. The earnings have doubled while the share price has remained static. There are so many reasons why this share should be valued higher than where it is ... but with a debt to equity of 66% we need to be careful. This is a speculation stock and for that reason we want a very good price.

Initially we would need a 20% discount to full value and I price full value somewhere around 85c-90c. The current share price is 51c giving us a discount of 40% to the full value. With a good dividend yeild holding this stock at this level we should see it climb in the next few years.

This is a speculative stock due to the high Debt level and I am going to be putting in a small amount of my funds. Lets see if it can grow rapidly like IBA did for us a few weeks ago.

Good luck.

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