DIRECT FOCUS, INC.

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DIRECT FOCUS, INC.

• Consumer Sector
• Jaci Barrett
• Arianne Obering
• Brian Price
• Mary Whitehouse
• John Wilson

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SECTOR OVERVIEW
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Current Stock Price Holdings

• WMT 58.05
• PEP 52.20
• GPS 14.66
• LTD 19.56

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COMPANY BACKGROUND

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

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Direct Focus, Inc.
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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

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SALES GROWTH
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NET INCOME GROWTH
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EARNINGS GROWTH

• 35.8 in 2002
• 27.7 in 2003
• 25.0 in 2004

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Valuation Ratios

• Price/Book (mrq) 8.89 
• Price/Earnings (ttm) 20.87 
• Price/Sales (ttm) 3.72

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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

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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

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Per-Share Data

• Book Value (mrq) 4.95 
• Earnings (ttm) 2.11 
• Earnings (mrq) 0.67 
• Sales (ttm) 11.81 
• Cash (mrq) 1.46 

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PROS/CONS

• High profit margins
• High ROE
• Strong Brands
• High growth prospects

• Large run-up in price recently due to higher than
  expected earningsrecently hit new 52 week high
• Management aversion to debt financing

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COMPETITION

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

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BETA ANALYSIS
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RECOMMENDATION

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