Coinstar (NASDAQ: CSTR) offers
North American and U.K. retailers a range of storefront service and entertainment devices. These include coin counters, kiddie rides, bulk vending machines, skill-crane games and point-of-sale terminals. The firm also provides self-service DVD movie rental/purchase kiosks and provides money transfer services, prepaid wireless products, stored value cards, payroll cards and prepaid debit cards. Coinstar products and services are distributed through more than 53,000 retail stores. Corporate clients include Wal-Mart (NYSE: WMT), Kroger (NYSE: KR) and Walgreen (NYSE: WAG).
The company surprised the Street last week, when it reported Q1 EPS of 18 cents and revenues of $190.5 million. Analysts had been expecting four cents and $182.7 million. Management also guided Q2 EPS to 8-15 cents (12 cent consensus), Q2 revenues to $200-$210 million ($202.19M consensus), FY08 EPS to 60-75 cents (57 cent consensus) and FY08 revenues to $850-$900 million ($829.83M consensus). DA Davidson subsequently upgraded the stock to "buy".
The CSTR share
price popped on the news and then settled into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers recommend the issue with five "strong buys", three "buys", four "holds" and one "underperform". Analysts expect an 18% average annual growth rate, through the next five years. The CSTR Price to Sales ratio (1.85), Price to Book ratio (3.32), Sales Growth rate (43.99%) and EPS Growth rate (100.00%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $24.69 and $38.00. A stop-loss of $31.45 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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