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DIRECT FOCUS, INC.

DIRECT FOCUS, INC. Consumer Sector Jaci Barrett Arianne Obering Brian Price Mary Whitehouse John Wilson. SECTOR OVERVIEW. Current Stock Price Holdings. WMT: 58.05 PEP: 52.20 GPS: 14.66 LTD: 19.56. COMPANY BACKGROUND. Established in 1986 Went public in 1999

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DIRECT FOCUS, INC.

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  1. DIRECT FOCUS, INC. Consumer Sector Jaci Barrett Arianne Obering Brian Price Mary Whitehouse John Wilson

  2. SECTOR OVERVIEW

  3. Current Stock Price Holdings • WMT: 58.05 • PEP: 52.20 • GPS: 14.66 • LTD: 19.56

  4. COMPANY BACKGROUND • Established in 1986 • Went public in 1999 • Direct products: Bowflex and Nautilus Sleep System • Retail and Commercial Products: Schwinn, Nautilus, and Stairmaster

  5. Direct Focus, Inc.

  6. Income Statements & Profitability • Sales (ttm): $424.9M • EBITDA (ttm): $115.8M • Income available to common (ttm): $75.8M • Profit Margin (ttm): 17.8% • Operating Margin (ttm): 27.3%

  7. SALES GROWTH

  8. NET INCOME GROWTH

  9. EARNINGS GROWTH • 35.8% in 2002 • 27.7% in 2003 • 25.0% in 2004

  10. Valuation Ratios • Price/Book (mrq): 8.89  • Price/Earnings (ttm): 20.87  • Price/Sales (ttm): 3.72

  11. PE RATIOS • 20.84 present • 16.02 times 2002 eps • 13.17 times 2003 eps • PEG ratio = 0.623 • PEG Ratio The PEG ratio is a powerful formula which compares earnings growth and the Price Earnings Ratio

  12. Price and Volume • Recent Price: $43.97  • 52-Week Low on 21-Sep-2001: $16.80  • 52-Week High on 19-Apr-2002: $44.75  • Beta: 1.66  • Daily Volume (3-month avg): 922.6K • Daily Volume (10-day avg):1.36M

  13. Per-Share Data • Book Value (mrq): $4.95  • Earnings (ttm): $2.11  • Earnings (mrq): $0.67  • Sales (ttm): $11.81  • Cash (mrq): $1.46 

  14. High profit margins High ROE Strong Brands High growth prospects Large run-up in price recently due to higher than expected earnings…recently hit new 52 week high Management aversion to debt financing PROS/CONS

  15. COMPETITION • Brunswick (Life Fitness) • Retail Mail Order Industry • Sporting Goods Industry

  16. BETA ANALYSIS

  17. RECOMMENDATION • USE capital from GPS Sale to Buy Direct Focus Inc. (DFXI) • Buy 100 Shares of DFXI • Price $42.00 as of today

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