Dave,
Thank you for starting the thread.
My analysis disagrees with Paul's. He is far more knowledgable in determining these things and more likely to be right, but I have come to different conclusions and decided to post.
According to my numbers, ELAMF has been showing after tax earnings of 6.67% in '96 and 6.37% from pretax net income of 8.8% and 8.1%. Had it not been for the Minimum Wage law hurting end of year margin, the pretax net income would very likely have risen near 10% and after tax about 7%.
Torres indicated 3 things in his conversation with David that stood out to me. $145 projected '97 revenues, the 3&4Qs would be stronger, and that they were "comfortable" with analysts projections (about 1.14 EPS). To me, comfortable means that they will meet or exceed. These statements were made before the Eurotec acquisition was announced, but he may have known about it.
At $145M: New contracts are based on the new wages and the stock issue wiped out debt so that they have interest income versus prior expense. These changes should return company back to margins above those before the Wage Law. I believe one can conservatively see an after tax profit this year near $10M and $1.33 EPS for '97. This should put the price of ELAMF at or above $16, but I expect it to be well over $20 early next year.
Torres also indicated that they are actively seeking acquisitions, the '98 situation is unpredictable except that it will be better than '97. I believe the management of this company to be good and that they will not be making high risk moves. Any growth or acquisitions will increase profits.
As to investing in Mexico. It has greatly changed since the passing of NAFTA. The recent elections indicate even larger changes than anyone thought. I believe that Mexico to be a far safer, more predictable, and more stable investment than China and some other Far East countries.
I do not expect great things out of Monday's report, about 23-25% growth over '96, and have taken my position for long term. Many are wanting higher growth due to some recent stock movements (NTAIF, DSWLF, DIIG) and want more than this, but major growth won't be indicated until 4Q. (I think those buying NTAIF on the runup might be in for a disappointment next Q)
For what it's worth,
Ron
|
