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Peter Lynch Guru Analysis for Ellie Mae, Inc.

ELLI 
$24.49
*  
0.49
  negative  
2.04%
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*Delayed - data as of Jun. 17, 2013 
Exchange: NYSE
Industry: Technology
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Assessments & Analysis Based on June 14, 2013 close price: $24

  for the P/E/Growth Investor based on the criteria of Peter Lynch. Return to ELLI Guru Analysis

All Star Guru Scorecard

Source Go Chart %
Peter Lynch 56%
Benjamin Graham 29%
Validea 39%
Motley Fool 56%
David Dreman 29%
Martin Zweig 54%
Kenneth Fisher 40%
James P. O'Shaughnessy 25%

   

Detailed Analysis

Guru Score: 56%

Determine the Classification:

This methodology would consider ELLI a "fast-grower".


P/E/Growth Ratio: [PASS]

The investor should examine the P/E (32.36) relative to the growth rate (108.6%), Based on the average of the 3 and 5 year historical EPS growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for ELLI (0.30) is very favorable.


SALES AND P/E RATIO: [NEUTRAL]

For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. ELLI, whose sales are $111.8 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate.


Inventory To Sales: [FAIL]

When inventories increases faster than sales, it is a red flag. Unfortunately we do not have sufficient data for ELLI to evaluate this criterion.


EPS Growth Rate: [FAIL]

This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for ELLI is 108.6%, Based on the average of the 3 and 5 year historical EPS growth rates, which is considered too fast.


Total Debt/Equity Ratio: [PASS]

This methodology would consider the Debt/Equity ratio for ELLI (%) to be wonderfully low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company.


FREE CASH FLOW: [NEUTRAL]

The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for ELLI (3.21%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.


NET CASH POSITION: [NEUTRAL]

Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for ELLI (9.0%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.
 
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