When Mario Cibelli (Trades, Portfolio) chose the name of his firm, Marathon Capital Management, he was probably referring to the way he purchases stocks. Cibelli is not a sprinter when it comes to stocks; he likes to take longer strides and hold on to the stocks he believes have the potential to double within three to five years.
Cibelli learned of his appreciation for the stock market when he was just a boy in the seventh grade, when his social studies teacher explained to his class just how the market works. He then had his father drive him to a local stockbroker's office, and he bought 10 Norstar Bancorp shares for $268.75. When he got to college, he sold his shares to buy his first car.
In order to figure out how much stocks will sell for within a 3- to 5-year period, Cibelli calculates enterprise value and sometimes alters his metrics. Here's a breakdown of how he does it:
- Base enterprise value on earnings before interest, taxes, depreciation and amoritization.
- Use free cash flow or earnings before taxes, or revenue if most appropriate
- Add excess cash and subtract debt
Cibelli also works with two full-time analysts to estimate how fast the company's earnings or cash flow will grow the following years, which will allow him to estimate the coming enterprise value per share. He will also apply a multiple he feels an outside investor would be willing to pay for a fast-growing and well-run business.
Some of Cibelli's latest stock purchases include: Shutterfly Inc (SFLY, Financial) and Xoom Corp (XOOM, Financial). Marathon does not own more than 30 stocks.
Shutterfly Inc (SFLY, Financial)
This chart shows revenue in relation to net income
Shutterfly Inc is a digital manufacturer and retailer that offers personalized products through various lifestyle brands. The company also owns an online marketplace that offers video and photographic equipment rentals.
Recent news: The digital retail company recently announced that it now owns GrooveBook, which is a photo book app for mobile smart phones. The app sends customers a keepsake photo album of their stored photos on their phones.
Current price of stock: $42.48
Up by: 0%
Why we this is a good investment:
- The company's operating margin is expanding
- P/S ratio is 2.08, close to the 1-year low of 1.91
What we think investors should watch out for:
- Piotroski F-Score is 3 and a low score usually indicates poor business operation
- Assets are building faster than revenue growth rate, indicating the company's efficiency is decreasing
This chart shows revenue in relation to net income
Xoom Corp is an online company that transfers money from consumer to consumer. It offers bank deposit services, cash pickup services and home delivery services. It also offers money transfers to banks, money transfer companies and retailers.
Recent news: The company's third-quarter earnings report showed a decline in new customers.
Current price of stock: $14.98
Up by: 0%
Why we think this is a good investment:
- Altman Z-Score is 5.69
- Stock price is close to 2-year low
- P/B ratio is 2.05, close to 2-year low of 2.01
What we think investors should watch out for:
- Piotroski F-Score is 3, which implies poor business operation
- Sloan Ratio is 0.34, indicating that earnings will more than likely be made up of accurals
- $21.7 million of debt has been issued over the past 3 years
