Earnings Preview: Heelys (HLYS)

Print Email

Heelys, Inc. (NASDAQ:HLYS) has been a like a ride at an amusement park since coming public.  The stock is actually close to its post-IPO lows now.  But all of a sudden shares are up about 5% hours before earnings.  Today is the earnings date and First Call is looking for $0.42 EPS on revenues of $73.3 million.  Be advised that there is still a very thin coverage universe in this stock and the company only has two earnings reports under its belt since coming public.

If it offers guidance, estimates for Q3 are $0.38 EPS & $68.4 million in revenues, and fiscal 2007 estimates are $1.60 EPS & $272.8 million in revenues.  So, assuming the company can hit this target for the year, it currently trades at just over 13-times 2007 earnings estimates.  The reason for the low forward P/E ratio is likely due to it mainly having a one product company, even if it does have apparel now and more accessories on the way.  The reports of wheeled-shoe injuries have been a likely hamper as well.

Its chart is ugly from falling off a cliff since early May and not really participating in the summer rally before the last drop.  The company also had to withdraw a share offering in June.  Most analysts are actually positive on the stock and average price targets still appear to be north of $30.00.  Options traders must be expecting a big jump or a big drop, because on a static basis it appears that options traders as of right now are braced for a move of about 10% in either direction.

We’ll see how the company does.  Post-IPO lows were just put in yesterday.  Its July short interest was up over 10% to more than 4.8 million shares.  Any good news out of the company could cause a pretty large short squeeze, although some of today’s move could probably be attributed to shorts getting out of the way and declaring victory. 

Jon C. Ogg
August 7, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.