Yeah, I can understand where you're coming from.
There's always the fear that the stock would drop close to zero. That's why I like to emphasize stocks with net cash (cash less liabilities) and minimum burn (hopefully positive earnings) so if it does drop, I know the cushion should be close to cash value. You may recall my rational exuberence for XENOS (XNS).
Now, you know my latest pet stock is CEP. It doesn't have a cash cushion to fall on, but it has earnings momentum. With EPS of .15 for the first 6 months, and a backlog of $15M, they are assured to be profitable for the next 3 quarters (Q3, Q4 and Q1 - 2004). I expect CEP to have minimum EPS of .05 for EACH of the last 2 quarters. The only risk in CEP is to keep the healthy order backlog. Apparently, they have a good chance with repeat orders from existing customers and new customers.
Applying a ultra conservative PE of 10 to current earnings, CEP should be trading at $2.50. As you may know, revenues have shot up and should be 3 - 4X that of last year. On the high side of the valuation a PE of 15 gives a valuation of $3.75. The market should be slowly waking up to this story, and upon release of Q3, there should be more believers and hopefully, a more realistic share price.
Good Luck. |
