**** Comments please ******
How is this as a new folder heading?
____________________________________________
American Eco (ECGOF, ECX on Toronto exchange)
American Eco is a leading provider of single source construction, project management, maintenance, demolition, dismantlement and environmental remediation services in the refining, petrochemical, government, commercial, manufacturing and utility industries.
americaneco.com
Stock Price 7 5/16
P/E 8.5
14.4 million shares
PEG on estimated 48% growth in 1997 = .18
Earnings
1994 - 16 cents
1995 - 41 cents
1996 - 81 cents
Q1 - 1997 - 25 cents
1997 estimated - $1.20
President & CEO - Michael E. McGinnis
The CEO has stated numerous times that they are comfortable with $1.20 in earnings in 1997 and over $200 million in revenues. By the year 2000, McGinnis wants to see $1 billion in earnings and believes this can be achieved. The company has grown both through internal growth and through aquisitions. However, without the stock price higher than it is now, acquisitions become difficult. It is therefore in both the interest of the company and the shareholder to see a higher price.
According to First Call, the company has had earnings growth that has averaged 87% over the last 5 years. The average P/E of the industry is around 18, while the average growth of the industry is only 11%. In other words, the company has grown at about 8 times the average of the industry but trading at half the P/E.
The CEO and First Call state that they will be able to earn $1.20 in 1997 - 50% growth. If the company were to trade at a P/E of 20 and earn $1.20, then by the end of the year the stock will be trading $24 / share.
According to First Call the average PEG (ratio of P/E to growth) in the industry is 1.3. If the company earns $1.20, then to trade at the average PEG of the industry the stock would need to trade at
$1.20 x 48 * 1.3 = $ 75 /share
Why is this stock so undervalued?
1. The CFO resigned in October of last year for health reasons but partly due to poor handling of the media, rumours spread regarding possible mishandling of the financials. Independent auditors were brought in to go over the books and given the ok, but some misgivings still remain.
2. The American Eco story is not easily accessible by investors or brokers. Although about 95% of the business is in the U.S., the company is Canadian registered - partly due to tax reasons associated with their Canadian components. However, because of this, there are no filings with the SEC. The lack of filings means that many computer databases of company info are blank, out of date, or filled with errors.
The Company's response to the current undervaluation
1. Fall 1996 - CEO purchases 300,000 shares in the late fall of 1996 at a price of over $2.5 million - part of this is borrowed money
2. April 1997 - Company hires a PR firm to get the American Eco story out. This includes broker teleconferences and ads in airlines magazines and other publications (e.g., Worth)
stockup.com
3. Company agrees to begin filing yearly (10k) and quarterly (10Q) statements with the SEC beginning with the 10k for 1996 to be filed in late April.
4. Pending approval at the May shareholder meeting, the company proposes to switch to one of the `Big 6' auditing firms
5. Company begins discussion of moving `domicile' to the US from Canada allowing the removal of the `f' from ECGOF
6. CEO begins presentations at a number of `growth stock' conferences and other media events.
Other Web locations for further research:
fool.yahoo.com
www2.marketguide.com
Report by Analyst William Block from Meyerson - June 1996
mhmeyerson.com
The MSNBC interview with McGinnis is available via Real Audio at
msnbc.nasdaq.com
There is also an excellent folder on the Motley Fool on AOL |
