Cendant: Value Investor's Dream
09/05/2002 12:00 am EST
Says John Dessauer, editor of Investor's World, “Cendant has already weathered its dark night, due to fraud at its CUC division. However, Cendant has put the mess behind it and transformed itself into a cash generating, profitable, growing company. This situation shows how difficult it is for even a good company to regain trust and confidence after fraud is discovered. The company settled the shareholder suits arising from the fraud and set aside billions of dollars in cash. The company has been under the microscope of auditors, the SEC, and federal prosecutors. All accounting issues have been resolved. With Cendant we can be as sure as is possible that there are no major accounting issues left lurking in the shadows.
This is a powerful story. Here is a diversified company generating lots of cash, reducing debt aggressively, and offering an organic long-term growth rate of 12% to 15% a year. Wall Street now looks for earnings of $1.45 per share this year and $1.65 to $1.70 in 2003. The stock sells for under ten times this year’s earnings – a value investor’s dream. In less than a year Wall Street will look at 2004. At the rate Cendant is going, estimates for that year could be above $2 a share, and that gets the stock to our long-standing target of $30. The stock is a buy.”
Says Richard Band, editor of Profitable Investing, “If I had to pick just one stock from among our aggressive ten-baggers (speculative stocks with the potential for significant appreciation), I would go with Cendant. Having cleared up its accounting woes from the 1990s, Cendant is now growing rapidly in travel services and real estate brokerage. Avis, a Cendant brand, has also become a more competitive operation. Twice since last December, the company has raised its earnings guidance. I foresee the stock in the low $20s within the next year – a gain of more than 50%.”