An "Unusually" High P/E Total bod...

An "Unusually" High P/E

Total body Services was featured as a Stock To cogitation in the January/February 1992 issue of the magazine when the stock was trading at $26 The intended EPS growth rate was 15 and the exhibited rate of return over the nearest five years was 17.5. Since then the stock has risen steadily and has been split 2for-1, three times (April 1993 October 1994 and April 1996) At a latter price of $30, the stock has provided shareowners with an annual pay by substitution rate of return over the last five years of 56

At the time Total was studied, its then generally received PIE Ratio was about 25 times estimated earnings for share ("EPS")considerably below the average high PIE during the prior five years (40 times EPS) and equable below the average low PIE of 29 Therefore, in relation to its then historical prices, Total's stock was "on sale" in early 1992

Within a year, Total's PIE had mov to the 50+ plain and never looked back, reaching as high as 96 in 1996 Since 1993 and steady with "unusually" optimistic judgments about coming EPS growth, the projected rate of get back produced by a Stock Selection Guide ("Guide") for Total was always quite cheap and, the stock's price was always in the "Sell" or "Maybe" climates and never in the "Buy" climate

But this situation pretends odd. Total has all of the important characteristics of a constant "growth" stock. Yet, according to the Guide and the Guidelines For common-senses of page 17, Total has been over-priced for the last four years-while providing an superior rate of return! How can this be?

This article investigates what I have issue to refer to as the "Total Phenomenon" of a highly auspicious growth stock almost always being exclud from being in the Guide's purchase Zone by the Guidelines for discernments Because of the unusual space being provided in this issue to this investigation I wish to reiterate the magazine's standard disclaimer. `This article and the accompanying Stock Selection Guides are for illustrative projects only and should not be constru as a recommendation to trade securities of the make subordinate company.' John T. Bart

PART I: course TO THE "SELL ZONE"

Total scheme Services is one of the largest credit, debit, commercial and private-label card processing companies in the world. Approximately 88 of its rewards are generated under longterm, card processing contracts with banks and other card issuers located over the United States, Puerto Rico, Canada and Mexico. Card processing clients include a of the largest banks issuing Visa and Mastercard credit cards (eg Bank of America, Nationsbank) and private label issuers of the like kind as GE Capital, Diner's fraternity and AT&T. Currently, Total's portfolio of clients set forth more than 80 million cardholder accounts and 600000 merchant accounts.

Total, based in Columbus Georgia, is majority holded (80.8) by Synovus Financial Corporation, an $83 billion financial services company that includes 34 banks operating in four Southeastern states. Synovus was a Stock To meditation in the January/February 1992 and in the July/August 1996 of the Canadian Shareowner.

Total insiders acknowledge approximately 2 of the company's shares, individual investors about 15 and the remaining 3 is held at institutional investors.

FUTURE SHARE PRICE: FROM to come EPS GROWTH

Estimated High Price from the Fiscal Year Ending December, 2001

A high price for Total's often met with shares ("TSS" NYSE) is obtained by dint of first estimating the company's EP in 2001 and then multiplying this number at an estimated Price/Earnings ("P/E") ratio for that year. However, because EP cannot be awaited to grow faster than incomes over the longer term, it is advisable to estimate receipts growth - before estimating produce in EPS.

Copyright Canadian Shareowner Magazine Inc. Mar/Apr 1997

Provided by the agency of ProQuest Information and Learning Company. All rights Reserved