How To Write Covered Calls - An Ongoing Real Case Study! Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: hpeace who wrote (3207)	7/17/1997 11:26:00 PM
From: Robert Graham	of 14162

Yes. I see the offering coincided with the drop in price today. I am concerned here since a well placed offering of stock like this should of had a at most small effect on the price of the stock. This was a crossed trasnaction from what I understand. The stock is very overvalued at a P/E multiple that is 4 times industry average. It is currently showing weakness in the price action and technicals. I will know more tomarrow. I expect the stock to go down a little more and then bounce on good volume. If this does not happen, I will move on to another company. The ballance sheet of this comapny is a mess with a LT debt to equity of 2.43 (no, this is not a misprint) at about 3.1 billion dollars. Industry norm is 0.93, which is still very high except for the guarenteed revenue in a regulated industry. Of course with deregulation, this is changing too. Cash flow apparently is what keeps these companies alive. However, AES is spending all available operating cash flow and more which it is financing through an increase of over $700 million in debt just in the year of 1996. Compare this to the revenue of $835 million for that year, and you can see this increase in debt is staggering. For first quarter 1997, they sold $400 million in stock instead of adding to their extravagant debt level. Over the past two years (1995 and 1996) there have been a significant and growing negative free cash flow. For first quarter 1997, their cahs flow dropped to $10 million (compared with $45 million same quarter last year). Their free cash flow for trailing twelve months was -5.51 per share, or an outflow of about $450 million, which is 50% of their revenue for same period of time. Yet the company continues to agressively purchase new assets in the form of ownership interest in other companies and also continues to bid and aquire the international assets of other companies, where several significant aquasitions which has occurred earlier this year. They also have comitted to the building of multiple new sites this year. Evidently this comapny is pursuing a temporary boost to their stock through very agressive and costly growth with some book work to make it come out as both revenue and earning increases. Insiders own 43% of the stock and institutions own 55% of the float. This is definitely not a long term investment. It is also IMO a speculative short term investment which can only be made strictly on the technicals of the stock. Any feedback? Bob Graham

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next