Friday, June 22, 2007

Sahul Sharma: IndyMac, Just Another Subprime Lender?

With 47% of the IndyMac’s float having been sold short and the stock down 30% year-to-date, true believers in the company are thin on the ground. The naysayers seem to be everywhere, while buyers are on strike. Dare I try to make a case that the market has got it wrong?

If you doubt it, look at the stock’s valuation. Indymac lately trades at just 1.13 times book value, compared to a historical valuation range of 1.6 to 2 times. Similarly, it trades at just 10.5 times this year’s trough earnings, even though the company has generated solid, 20-plus-percent earnings per share growth for the better part of a decade.

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