Three French Hens (from December 2010)

An oldie but goodie flashback. This countdown nostalgic moment comes from the selection of  Vistaprint (VPRT) during our 12-day Christmas Countdown during December 2010.

It was a dark, foggy … actually quite misty … night and I stood and shivered while waiting patiently in the shadow of the Eiffel tower.  I had called Bob Woodward to see if he wanted to come with me, but he had too many Washington D.C. holiday parties to frequent.  I thought to myself, “… even if impaired, he has more experience at this sort of thing than I do.”  It felt good to “hear” some English, even if it meant talking to myself.

My respite was shattered by some rustling.  I peered over my shoulder to see three french hens, decked out in trench coats, scratching their way to me.  I nodded.  It was clear that no password was necessary … but that another bottle of wine wouldn’t hurt.

“Bonjour, Monsieur Manifest.  Comment allez-vous?”

(Great.  More French.) “Greetings.  Do you speak any English?”

“Desole (sorry) … until tonight, we didn’t know that we could speak.”

“No problem.  You’re talking to someone who once wrote that he did stock studies with Elvis at a Denny’s in Kalamazoo.  Anything is possible.”

“Ah! Elvis! Tres bien!  Magnifico!”

“That sounded like a little Spanish?”

“We’re working on our diversity in the hen house.”

“Splendid.  Did you bring the information?”

“Oui.  But try as we might … and we did … we couldn’t find a French investment opportunity for you.  You did that session on Sanofi-Aventis a couple of years ago.  Our advice is to keep Sanofi on the radar screen.”

“What did you come up with?”

“It’s Dutch.  But it seems to fit with the festive season … you know wooden shoes and that Kris Kringle thing.  The company makes holiday cards, too.”

“I’m waiting … if you’re waiting for Woodward, he’ll not be joining us.”

“Americans.  So impatient.  (cackling audible)  The company is Vistaprint (VPRT).”

“Merci.  Have a wonderful holiday season!”

“Au revoir …”

Vistaprint (VPRT) offers small businesses everything they need to market their business. We offer high-quality printed marketing materials, promotional products and marketing services such as copywriting, design, websites and postcard mailing.

Sales Growth Forecast

The company is still relatively small, but growing, and transitioning from a small to medium-sized company.  Higher sales growth rates have been replaced by forecasts that are moderating.  The company is susceptible to recessions (impact on smaller and medium-sized customers) but has been flagged by some analysts — including a cheery consensus — to benefit from economic recovery and small business incentive programs.

The big slowdown in small-medium business spending really hurt Vistaprint, which provides printing and marketing services to companies that are too small to handle their printing needs on an in-house basis. Shares plunged in early August, which looked to me to be a severe over-reaction.

Analysts at Kaufman Bros. see shares rebounding back from a recent $37 to $50 as the company’s sales problems this summer prove to be short-lived. “Vistaprint is currently facing a perfect storm, with small business weakness, adverse (foreign exchange) impact and recent execution issues. We note that all these factors are temporary, and should reverse themselves in the future,” notes Kaufman’s analysts. They predict that shares, which currently trade for 13 times next year’s profits, will trade up to a price-to-earnings (P/E) multiple of 20x once these near-term concerns abate.

Spending at small businesses is likely to rebound only slowly into 2011 and perhaps more robustly into 2012. But investors need to look ahead, and these stocks could start to appreciate handsomely, simply on the expectation that small and medium-sized business spending will eventually rebound …

Profitability Trend and Analysis

Historical net margins are in the 10% range with analyst expectations for 2011-2012 in the 12% range.  This may be optimistic but the company appears to be capable of delivering.

Value: Projected Average P/E

This is a “classic” aging curve — displaying a decaying trend for P/E as the company matures and moves from a small to medium-sized company.  Growth rates in the 30-40% and above have been replaced by expectations less than 20%.  The P/E forecast must naturally follow.

Equity Analysis Guide

Based on a sales growth forecast of 17%, profitability in the 12% range for net margin, and a projected P/E ratio down from historical levels (but still ample) at 22x … the projected annual return (PAR) is 16-17%.

We’ll close with the Christmas Card that I built while visiting their web site ( and doing some research on the company.

From partridges to doves to hens, I’m spending a fair amount of time with the winged animal kingdom and now I have to figure out what a “calling bird” is and see if I can locate four of them … (to be continued)

Reminder: This is an educational demonstration with companies used for illustrative purposes.  NO INVESTMENT RECOMMENDATION IS INTENDED.  Do your own homework and make your own decisions.

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