Sunday, September 30, 2012

"Mortgage origination is a hot area right now. We found one stock with a name similar to one of the characters of a favorite TV show of the 60's, the Beverly Hillbillies"

Dow Jones Industrial Average 13,437 (Down) Week ending 09-28-2012

Elly Mae Clampett
Every time I see the name of this stock, Ellie Mae Inc. (Symbol ELLI, $27.23), it always makes me laugh and I think back to my childhood in the 1960's and watching the situation comedy show The Beverly Hillbillies, with Jed Clampett, and his curvaceous, tom-boy daughter Elly Mae Clampett. 

Of course, the first week out after my great Return on Equity tenet declaration, I am already stretching my rules by discussing a stock that has an ROE of only 14.29%.  ELLI though,  has some other great attributes like a 1 year Total Return on the stock of 389.75%. That buys you a little more credibility. The PEG ratio is fine at a safe 1.16.

The Clampetts arrive in Beverly Hills

Ellie Mae, Inc. provides automation software for a large segment of the mortgage industry in the United States. ELLI, 5 year sales growth has averaged 8.83% per year. Projected Long Term Earnings growth is forecasted at 60.47%, so this will probably take care to improve that ROE. 2012 earnings are projected at .74 cents per share and for 2013, $0.79 cents per share.

The Wall Street Journal , MarketWatch website this week stated:

"Ellie Mae , Symbol ELLI, hard on the heels of reporting second-quarter results, again raised its full-year forecast for profit and revenue as well as earnings before interest, taxes, depreciation and amortization on an adjusted basis. As revised, the Pleasanton, Calif.-based provider of automation solutions for the residential mortgage industry sees 2012 net income in a range of 49 cents to 52 cents a share, up from 26 cents to 28 cents a share previously. Profit on an adjusted basis now stands at 68 cents to 72 cents a share for 2012, up from 42 cents to 45 cents a share previously. Full-year revenue is now pegged at $90 million to $91 million, up a prior range of $78 million to $79 million. And adjusted EBITDA is projected at $21.6 million to $22.7 million, well above the $13.1 million to $14.1 million previously forecast for 2012. Sig Anderman, CEO of Ellie Mae, noted that mortgage origination volume during the second quarter ran higher than had been forecast by Fannie Mae, Freddie Mac and the Mortgage Bankers Association earlier in 2012 and that projections have been revised higher."

Jed Klampett
Elly Mae and Granny and friend
       So this Ellie Mae is looking a lot better that Fannie Mae and Sallie Mae.  I think that Mr. Drysdale, Jed's banker , would also like the balance sheet of this Ellie Mae.  The company also has zero long term debt. There are 25 Million shares outstanding on the stock.

 Jethro eating his Kellogg's cornflakes
So it looks like both Ellie Mae's are looking pretty good. One for your Small cap portfolio and the other to add to your vintage TV show collection.

Elly and critter friend

So, I hope you strike crude oil while shooting in your backyard, (or in PA. , natural gas will work too!)

All the best,        Freewilly 


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