This is the Value Investor podcast with Tracy Rinek, all things value all the time. Welcome back value investors. So I was on StockTwits the other day. StockTwits is the Twitter for stocks if you don't know what it is.
It's very similar and I post investing information on both sites, usually on StockTwits first and then over to Twitter. So you can follow me on both sites and I do recommend StockTwits for those who aren't on it. If you are interested in certain companies and kind of what's going on in the news with just that company or if it's trading strangely, either up or down, I usually go over to StockTwits and kind of see the thread on that stock ticker and see what everybody's talking about and see if anyone knows anything. Sometimes it's just rumors, a lot of times people don't know anything but sometimes they do and they post things that are going on in the news that maybe didn't show up anywhere else on some news feeds or changes in recommendations by analysts, sometimes get posted there.
So it's kind of a good source to just kind of check in on certain stocks. So I was on there and I was checking out a stock that I own called Funko. F and KO is the ticker there Funko and they are a toy company if you don't know about them. They make those pop type collectibles.
That's kind of their main product that they have licenses for like all the superheroes and a lot of the Disney characters, Harry Potter, just a lot of kind of cultural iconic brands and characters. They own licensing agreements on a lot of those. So they have those pop toys but they've expanded into a lot of other things recently. I've owned Funko in my own portfolio for a couple of years now and I just like them.
So I was checking out their stock to its speed, kind of seeing what was going on over there and someone posted that the shares were overvalued because they had a PE of 250. So I knew that wasn't right, that it was 250. So I did respond to that person because I don't like seeing blatant misinformation on Twitter or stock to its about stocks. And so I did look to see what Zach was showing it and we had a forward PE at the time of 24 with Double Digital Revenue Growth.
So I tweeted that back out and said, no, it's not a PE of 250. It's really 24 and it's got strong Double Digital Revenue Growth expected this year. And he came back and said, no, I'm wrong. And I don't know what I'm talking about.
And it's overvalued. So shares of Funko have had a huge run in 2021. They're up 90% due to date. So that's kind of also what he was complaining about that it's just it's overvalued here on this big run.
But why did it run that strongly so far in 2021? And most of that is on the news that they're getting into NFTs. It's likely by the summer they're going to be launching some kind of NFT products and anything associated with NFTs has seen a lot of investing interests, so to speak. So again, they own many of the licenses.
So doing something in NFT world would seem logical for a company like Funko. But they've expanded in recent years outside of just the collectibles areas into board games. They were already expanding into that before the pandemic, but that has really boosted their earnings and revenue during the pandemic. And then they have this launch fly of heroin accessories category that has also just been red hot for them.
But the fundamentals are there even without the NFTs. So they did give revenue guidance in their last earnings call of between 20 and 30% this year coming off of a more difficult year last year during the pandemic. Now they see a lot of big gains when the big superhero movies come out or when there's like Comic Con conventions and things like that because people will buy and invest in the pop figures around those certain big events and those were not happening. And then just having even their some of their stores where they sell, not having difficulties either they're closed and lockdowns both in North America and Europe or just other issues were going on in retail as we all know last year.
So that took a hit. But a lot of that is turning around. So they're seeing the strong earnings and revenue growth here in 2021 outside of the NFTs. So again, he replied to me that I was wrong.
It's really trading at 250 times. And because there was such a disconnect there and he kept insisting he was correct, I figured yeah, something must be up that he's looking at something different than what I'm looking at that he must be looking at the trailing PE. So Yahoo Finance, if you're using Yahoo Finance on their main summary page uses the trailing PE and you know that because it says after it TTM, which stands for the trailing type of PE. So what is the trailing PE?
That's the price compared to the last year's earnings. So it's going to be a little bit different than the other sites. So on Yahoo Finance, currently Funko's PE is at 180. It is lower than when he said they were at 250 because the shares have pulled back a little bit.
But on ZX.com, they're no longer at 24 times. They're now at 23 times because Zax uses the forward PE. So what's the forward? Again, that's looking at the analyst estimates for the coming year.
And since we're in the first half of the year, it's really looking at 2021 estimates right now. Later on in the year, as we get to the second half, it'll start looking at 2022 to figure out to the forward PE. But right now we're still looking at 2021 and those estimates because they're from analysts and they're just estimates are not certain. Nothing is set in stone with forward looking estimates.
Trailing that Yahoo Finance is using the trailing earnings, the world earnings from last year, to create the trailing PE, that is a certainty. The only thing that's going to change is the price in that figuring out that fundamental in that PE, but the E is certain because we already know what everybody made for last year. That's already determined. So why is it such a big disparity?
Why do you have Yahoo Finance at 180 and Zax at 23? Yes, one is looking at trailing, the other one's looking at forward, but that's a big, big difference, right? And if you were looking at, hey, is the stock overvalued and only looking at the PE, you would get very different responses. You would be certain that it was overvalued at a PE of 180 versus just 23 times.
So you got to look at the earnings, right? So Funko made 37 cents in 2020. The Zax consensus is looking for 92 cents here in 2021. That's up 148%.
And one estimate was even higher just in the last week. The one analyst is getting a little more bullish already even in just the last week, although they don't report earnings for a little while still again. So that's a big difference. 92 cents versus 37 cents.
Will they make the 92 cents? Nobody knows. This is just the analysts giving their estimates here, right? So we don't know yet, but we are going to see a lot of differences in the trailing versus the forward PEs this year because of the impacts on earnings last year due to COVID.
Some will sway it in one direction, some will sway it in the other depending on what that company did during the pandemic, whether that they were a pandemic loser or a pandemic winner will determine the big change between the trailing PEs on Yahoo Finance and the forward PEs on sex.com. So let's take a look at one of the home builders because this is kind of an interesting analysis if you look at them. So I chose Lenar because they've already reported earnings recently, ticker LEN. And their trailing PE on Yahoo Finance is now 10.4.
But the forward on sex.com is 9.5. And that's because it's only slightly cheaper because year to date, the shares are up 33.5 percent. So the PE is on the rise, but the E was very healthy last year. The E was high last year.
Last year, they made 7.85. This year, the E is higher again, up 39 percent to 10.98. So we have the shares rising and then we have the earnings also seeing another big gain after last year's big gain. So last year, still trading at 10.4, not that much cheaper because the shares are on the rise, even with the E part of it also up big.
But our still remains cheap based on the forward-looking PE the same as last year when it was also cheap based on what it did in 2020. I took a look at some of the other kind of more explosive stocks to see if maybe there was any value there with what's been happening in 2020. So I took a look at Tesla, ticker TSLA. And I'd love to test on the past on the podcast, but it's been a couple of years to see if it was a value, especially on some of the times when it did have kind of decent pullbacks or it was just kind of treading water as we all know there for a couple of years.
And I'd look to see if maybe the E was catching up and you could say that there was some value there. But looking at it again, okay, so Yahoo Finance says that the PE is 1,132 for Tesla. So that doesn't sound cheap at all. Over 1,000 on the PE.
But Zach says it's just 167 times. So it has gotten actually cheaper here on a PE forward PE basis because the shares are up only 2 percent here in 2021. They had the huge gains in 2020, but they haven't done much and then we're even down for a bit here in 2021. But the earnings are expected to rise 90 percent here in 2021.
So that's what I mean when I say Tesla has gotten cheaper here in 2021, even though the shares are up to only 2 percent because the e portion is expected to be much higher. So they made $2.24 in 2020, but they're expected to make 427 so nearly double here in 2021. That's why you have the forward coming down a bit to 167. And so these are things you got to look at when you are comparing what happened last year with what's happening this year and whether or not a stock is truly cheap.
Conversely, those that saw big earnings growth last year along with the share price and are still seeing big share price growth in 2021, but not so much on the earnings side are going to see their PE's go a little bit the other way. They're going to get more expensive. So a good example of this is Wayfair, ticker W. They are one of the big pandemic winners, no doubt about it from 2020.
Now, some people are thinking that they could continue with this momentum here in 2021 because year to date, the shares are up 39 percent and they're still hanging out near the all-time highs. They've had some pullbacks off the 2020 all-time highs, but have chended back up towards that here in 2021. So here to date up 39 percent. But what are those earnings expected to do?
So they really exploded last year, not surprisingly, and they made $5.04 last year. Now this year, the analysts are more conservative and expecting to see a slowdown as the economy reopens. We won't have to order everything for our houses online anymore. So earnings expected to only be $2.33.
That's a decline of 53 percent. But you have those shares still hanging out near all-time highs. You have earnings declining 53 percent. So you're going to have a little bit higher PE ratio there.
The trailing is looking at 169. The trailing PE on Yahoo Finance is 169. On Zax, the forward PE is 138. So not that much difference between those two because the E is now coming down.
So shares remain more expensive here in 2021 because the price is up, the E is down. So not that much different from the trailing from last year. I took a look at some of the apparel retailers because they were another group that's the flip side of Wayfair in retail. So Wayfair was one of the big beneficiaries of the pandemic and won't be quite as much on the recovery.
But the apparel retailers really got hammered during the recession. Nobody needed to buy anything because they weren't going anywhere. They didn't need that new dress to go to that wedding. They didn't need kids who weren't going to the prom, so no prom dresses.
They didn't need to buy new shoes. They didn't need to buy work clothes for the most part. So a lot of the apparel and things associated with clothing have not done well last year. But this year, we're really seeing a change in those patterns and we're seeing things like dresses really explode as everybody wants to go out and they want to dress up.
And even if people aren't returning back to the offices, they may later on this year. We don't know yet. And some of those clothes are starting to pick up, including jeans. So the yoga pants are going out.
The jeans are coming back in. So one of those I took a look at was G3 Apparel, which I've talked about many times on the podcast, ticker GII. I just recently covered them. But I took a look at their PE and what's the situation there.
So Yahoo Finance says they're very expensive. They have a trailing PE of 65. So if you only look at Yahoo Finance, you'd be like, oh, I'm not touching that. That's way too hot to handle for an apparel company 65 times.
But Zax, because we look at forward, is looking at a PE of just 13. So that would be in the value range. It's under 15 times. That's pretty cheap.
That's dirt cheap here. 13 times forward. That's because last year, G3 Apparel only made 72 cents, but they're expected to make 233 this year up 223%. Now, the shares have seen a boost, but not enough to counter that big e-growth.
So that's why the shares remain cheap. So some of this analysis looking just at trailing versus forward PEs and then taking a look at that earnings is similar to what I've done many times here on the Value Investor podcast about the value trap analysis. Remember, a value trap looks at stocks with low PEs, but looks to see if maybe there's some kind of trap there. And the thing to ask about that is are the earnings rising and then you also have the cheap valuation.
So if the earnings are declining, like they are with Wayfair, that would be more of a trap component to it. Even here in this situation, even with Wayfair's PE way above the value level, if you were just looking for gross stocks to see if they were cheap based on some kind of pullback or correction in the overall market or in those shares and you're sitting there wondering, hey, does this have some value now? Then this is a good method to use to look and see if maybe it does. So Wayfair's declining earnings is basically a warning to those value investors to watch out for what you're paying for those earnings.
So if I was thinking on even a 10% pullback on Wayfair shares here that, hey, maybe this is a deal here, well, these earnings are kind of warning me that it might not be because those earnings are declining 50%. So I'm still even with a 10% pullback paying quite a high valuation for these earnings that are now half the size of last year. But overall, we aren't seeing quite as many companies doing what Wayfair is doing here in 2021 as we are seeing the opposite as what we're seeing with G3 Apparel or Funko or even Tesla, some of these companies where earnings are set to really see some big gains here in 2021 because they were hammered quite a bit in 2020. So earnings for the S&P 500 are expected to be up 25.6% this year after declining 13.1% last year.
So not a surprise as the pandemic eases, we are going to see a reversal and a recovery in the S&P 500 earnings. On the revenue side, similar recovery, revenue expected to be up 8.3% this year after decline of 1.8% last year for the same reasons. Now, all the earnings estimates from the analysts continue to be revised mostly higher here as we're going through this first quarter earnings season. The analysts are way behind and almost everybody's beating and beating by a lot.
So I would expect those earnings estimates to be revised higher for the quarters throughout the remainder of this year. Looking forward. So this earnings rise of 25.6% probably is on the low side and is probably going to be revised higher as we go along in this year. But that's just something to keep in mind too with any of these companies that on the forward PE, the earnings are all still revised quarterly, weekly, all the time by the analysts as things in the economy and the businesses change in these companies.
So do the earnings. So keep that in mind. You always have to recheck in and see what's going on. So again, if you're due to investing, keep these things in mind about the PE.
Because the PE is a good tool to use to search out for value and to look for overvalued stocks, if you see the PE as at 1,000, well, yeah, most value investors probably aren't going to get in there. But be sure you know what you're looking at. Be sure you know if it's the trailing or if it's the forward and what both of those things mean before you determine that it for sure is massively overvalued. It may not be.
And definitely go look at those earnings estimates. You can get them on sex.com under detailed estimates on our page or you can get them on Yahoo Finance as well. If you dig down past the summary page, they have a lot of earnings estimates data there as well. You can see who is really growing their earnings and what the analysts are doing to change those earnings estimates.
As I said, Funko already had one analyst just raising in the last week there. So there's going to be a lot of changes this year and you're going to have to keep on with all of it. But again, keep these things in mind because things might not be as straightforward as you think with the PE. But let me recap the stock tickers I talked about again here.
Most of these have value. Let's just say at least one is a value trap however here. And then one is not a value, but it's you know, looking more interesting now that the E's otherwise. Now it was Funko.
I own that in my own personal portfolio as I said, ticker FNKO. Is it cheap right here at 23 times? No, not as cheap as it was last year. But that E is growing.
So I like that part of the story. So Funko FNKO. Lenar, I still love all the home builders ticker LEN. They are all dirt cheap and the E is still on the rise as we have probably multi-year bull market housing going on.
So any pullbacks on the home builders are good buying opportunities and I chose Lenar. It's a Zacks number one rank. It's already reported for this quarter. But there's many that are top ranked stocks in the home builders, but this is Lenar LEN.
Then we had Tesla. It's getting more attractive on a valuation metric because the E is on the rise there. So not quite as expensive as last year, even with last year's Big Rally because the shares haven't really done anything here in 2021, but the earnings are on the rise. So Tesla TSLA is the ticker.
Wayfare is the only one on today's show where the earnings are in the decline. So that's a warning for the value trap people out there to be on the lookout for some of these where the earnings are really going to go the other way here in 2021. And that was Wayfare, ticker W. And then we finished it with the apparel retailer G3 Apparel.
It owns Donna Caron. It has licenses with Calvin Klein, Tommy Hill figure, many other brands. It owns Bill of Breek Wind, which does swimsuits. That should be coming back as travel opens up, but that's G3 Apparel ticker GII is the ticker with the big 200% earnings growth expected over there.
But as always, I'm going to be bringing you as many interesting value stories as I can find out there because it is interesting this year with a lot of stocks trading near highs, but the E on the increase, the earnings really expected to soar here in 2021. So it's going to be an interesting year for value investing, it's going to be covering it all. And I'll be doing some more value trap episodes once we get through earnings season. So you want to be sure to subscribe.
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