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SNDK is up 45.12% for 2010 compared to the S&P 500 Index, down 7.57%
Mean reversion trade: SanDisk (SNDK)
Company Overview
SanDisk Corporation (SNDK) is in the business of designing, developing and manufacturing data storage solutions in a range of form factors using the flash memory, controller and firmware technologies.
Fundamentals
Shareholder Equity: SanDisk has 230 million shares outstanding. 226 million are floating shares available for the public to purchase. Institutions own 76.45% of the stock.
Financial Strength: Shiloh has a debt to equity ratio of 0.23. The company has been less aggressive in using debt to finance growth than 62% of the companies in the computer storage devices industry.
Valuation: The trailing price/earnings ratio for SNDK 11.65, a higher valuation than 62% of the companies in the industry.
Profitability: A net profit margin of 21.48% places SNDK in the top quintile of the industry.
Management Effectiveness: Both return on assets at 15.05% and return on equity at 23.38% are high. The return on equity number indicates that SanDisk is reinvesting its earnings more efficiently than 78% of its competitors.
Growth Rate: At 137.8%, the company’s growth rate is better than 76% of its competitors.
Analyst Ratings: Thomson Reuters has an “outperform” rating on the stock. Standard and Poor’s rates the shares as a “hold.”
Performance
The shares of SNDK are up 45.12% as of Wednesday’s close while the broad market as measured by the S&P 500 index is down 7.57%. The trend is up.
Short-Term Reversion to the Mean
SanDisk closed on Wednesday at $42.07 after reaching a high of 50.55 on June 21. SNDK is oversold within a bullish trend and a candidate for a reversion to the mean trade. The strategy is to buy on Thursday at 42.07 or better with a stop loss placed at 3.38 below the entry price. The target price is 48.82 based on Wednesday’s close.
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