5 major dud stocks of 2010
Many of the S&P 500's worst laggards are closely watched companies like Alcoa and Monster Worldwide.
By Jake Lynch, TheStreet
The S&P 500 Index ($INX), despite last week's stock-market rally, has fallen 4% this year after posting a monumental rebound in 2009. Individual members of the benchmark index have suffered more pronounced downturns. And many of the laggards are closely watched companies.
Here are five of the worst-performing S&P 500 stocks so far this year. They are ordered by return, from bad to worse.
5. Monster Worldwide (MWW), a global online job site, has tumbled 32% this year. Monster's first-quarter loss more than doubled to $24 million, or 20 cents a share, as revenue declined 15%. The operating margin fell further into negative territory.
Despite improved bookings and the steady ascent of its proprietary Employment Index, Monster has been punished by market participants. Its stock is conspicuously expensive, trading at a price-to-projected-earnings ratio of 40, a 75% premium to the Internet services industry average.
4. Diamond Offshore Drilling (DO), a contract oil-and-gas driller, has decreased 34% in 2010. An offshore drilling moratorium and fears of legislative repercussions for the BP (BP) Gulf spill have hurt sentiment on Diamond. First-quarter profit fell 17%, to $291 million, or $2.09 a share, as revenue declined 2.9%. Pessimism has created a discount. Diamond sells for a price-to-projected-earnings ratio of 8.5 and a price-to-cash-flow ratio of 5.8 -- 62% and 44% discounts to peer averages. Analysts are lukewarm on Diamond, with just 21% rating its stock "buy."
3. Aluminum specialist Alcoa (AA) has fallen 34% this year. The metals company has posted losses in five of the past six quarters despite ongoing efforts to streamline operations. Its first-quarter loss narrowed 60%, to $201 million, or 19 cents a share, as revenue advanced 18%. Alcoa is the worst-performing Dow Jones Industrial Average ($INDU) component of 2010. Its shares sell for a price-to-projected-earnings ratio of 9.8, a price-to-book ratio of 0.9 and a price-to-sales ratio of 0.6, discounts of 46%, 70% and 91% to respective materials peer averages.
2. King Pharmaceuticals (KG) sells branded drugs for humans and animals worldwide. Its stock has dropped 35% this year. King acquired Alpharma Pharmaceuticals in 2008. King swung to a first-quarter profit of $4.5 million, or 2 cents a share, from a loss of $11 million, or 4 cents, a year earlier. Still, the operating margin contracted to 7.7% from 19%. King trades at a PEG ratio, a measure of value relative to predicted long-run growth, of 0.1, signaling a 90% discount to estimated fair value. Analysts are bullish on the stock, with eight, or 53%, ranking it a "buy."
1. Office Depot (ODP), seller of supplies, software and furniture, has slumped 36% this year. The company swung to a first-quarter profit of $29 million, or 7 cents a share, from a loss of $55 million, or 20 cents, a year earlier. Revenue declined 4.8%. The operating margin remained in shallow positive territory at 1.8%. Office Depot shares sell for a price-to-projected-earnings ratio of 20, a 31% premium to the industry average. However, the stock's book value multiple of 1, sales multiple of 0.1 and cash-flow multiple of 4.5 demonstrate sizable discounts to peers.
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The company plans to close stores and lay off employees, and says it needs to make some deeper changes.
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