By WTT Contributing Columnist Gail Kailing SIDOTI & Co, LLC (www.sidoti.com) "Banta has a younger management group that we think will grow the bottom line through new technology now coming into a mature industry," says Michael D. Friedman, Equity Analyst, SIDOTI & Co., LLC, a small cap research house. "While the change in technology has been a continuous process, efficiency through technology is essential to grow earnings in the print industry, in my opinion." Friedman told us that Banta's revenue growth is not in printing. Year-over-year the print business is down, partly influenced by the drop in paper costs. (Banta purchases large quantities of paper for their customers and with lower paper expenses, gross revenue declines as Banta charges customers less.) The potential growth is in the obvious synergy between supply chain management and printing, especially the worldwide network. Friedman says Banta deserves credit for being aware of trends and moving quickly to take the measures necessary to keep costs under control. "By developing cost containment processes, the company has been better able to weather the recent downturn. They've made smart moves and had good luck." VectorVest (www.vectorvest.com) VectorVest offers stock analysis based on data and content from 60 sources to create "vectors" that are used to establish the "Value" or measure of the stock’s current worth. Value is based on earnings, earnings growth rate, dividend payments, dividend growth rate, and financial performance. Interest and inflation rates also contribute to the computation of Value; when interest and/or inflation rates decrease, Value goes up. When interest rates and inflation increase, Value goes down. Banta's stock has a Relative Value (when compared as an alternative investment to AAA Corporate Bonds) of 1.04 on a scale of 0.00 to 2.00, which is "fair." An RV rating above 1.00 has "attractive upside potential." Rating Relative Safety looks at safety from the viewpoint of an equity investor, and Banta has a Relative Safety Rating of 0.98. On a scale of 0.00 to 2.00, 0.98 is "fair." A rating less than 1.00 is less predictable and riskier than the average stock. Relative Timing analyzes the direction, magnitude, and dynamics of a stock’s price behavior over the last 13 weeks, then reflects and projects the short-term price performance. Banta has an Relative Timing rating of 1.21, which is "very good." If the Relative Timing is above 1.00, the stock’s price is in an uptrend. Banta has a VST-Vector rating of 1.09, which is considered "fair" on a scale of 0.00 to 2.00. The VST-Vector calculates a balanced Value, Safety, and Timing rating. VectorVest also gives a Growth Rate (GRT) forecasting Earnings Growth Rate in percent per year. Banta has a GRT of 5% per year, which VectorVest considers "poor." Morningstar, Inc. (www.morningstar.com) Chicago-based Morningstar, Inc. is a global investment research firm, which provides information, data, and analysis of stocks, mutual funds, exchange-traded funds, closed-end funds, and variable annuity/life subaccounts. Rather than calculating "vectors," Morningstar gives "Stock Grades" which consists of three grades, in Growth, Profitability, and Financial Health. All grades are based on relative rankings of companies within their industry sector, and are calculated from numbers reported by the company in its SEC filings. Following is the grading for Banta, the printing industry, and 6 industry "peers" with sales approaching $1 billion or more. Stock Market Cap $Mil Sales $Mil Growth Profitability Financial Health Banta 941.0 1,458 D A- A Industry Average 767 962 C+ B B RR Donnelley 4,244 5,298 D B B+ Quebecor World 4,041 6,347 A+ B- B+ Deluxe 2,909 1,291 C- A+ B+ Reynolds & Reynolds 2,118 992 C+ A A Standard Register 782 1,175 C A- B Bowne 527 1,041 B+ B A- It appears that growth is an area where Banta and a number of its industry peers do not garner particularly high grades with the exception of Quebecor World. The top seven companies graded here have good to very good grades for profitability and financial health. This bodes well for the printing industry in general. Robert W. Baird & Co. (www.rwbaird.com) Robert W. Baird & Co. is an international wealth management, investment banking, asset management and private equity firm with 80 offices in the United States and Europe. Baird’s "Investment Thesis" says that "We continue to recommend the shares of Banta for value accounts as a Market Outperform.... We do not expect solid earnings momentum until the second half of 2002 when print and supply-chain management results should begin to show improvement due to an expected rebound in the economy... Downside would appear minimal given the company’s share repurchase program, which likely would resume should the shares weaken from current levels." StockDiagnostics.com (www.StockDiagnostics.com) On June 5, 2002, StockDiagnostics.com reported that Banta set Operational-cashflow Per Share (OPS) records for its first-quarter and twelve-months ended March 31, 2002. OPS stands for “Operational-cashflow Per Share”. It is derived from the line item “Cash Flow from Operations'' which appears in a company's quarterly and annual Cash Flow Statements filed with the SEC. OPS is calculated by dividing a company's Cash Flow from Operations by the total number of shares outstanding. StockDiagnostics.com says cash from operations is a company's financial lifeblood and a sudden decrease can be an early indicator of future problems. Banta’s OPS increased 41% for the three months and 44% for 12-months ended March 31, 2002 over the comparable periods ended March 31, 2001. This performance is rare. StockDiagnostics.com cites Banta as being one of only sixty-nine public companies out of 7,342 with record OPS in their most recent quarter and trailing 12-months, while also recording positive OPS for at least their last 20 consecutive quarters. For the first-quarter ended March 31, 2002, Banta's computed OPS was $2.22, an increase of 41% over its OPS of $1.58 for its first-quarter ended March 31, 2001. In the trailing 12-months ended March 31, 2002, Banta's OPS increased 44% to $7.89 as compared to its OPS of $5.46 for the comparable trailing 12-months ended March 31, 2001. Gail Nickel-Kailing can be reached at [email protected].