Do you know assumptions behind earnings estimates?
I'm guessing the new estimates are based on ACTM being unable to replace lost business revenues. Another reason I prefer to use PSR and production capacity to guide my ECM investments, along with strategic plan.
I've not been enamored by ACTM's strategic plan, but the ECM business in the Northeast is still good. Just look at IECE's recent announcement that they will exceed analyst's expectations for the current quarter. If the ECM business is still hot, then within the next 3-6 months, ACTM should be able to replace the lost business. Then next year the impact of the Irish and Georgia plants should be felt as well. I'm thinking that the analysts got blind-sided on the last quarterly announcement, and are using the most pessimistic growth projections looking forward.
If we look at last year's earnings of 1.12, then an estimate of 1.53 for next year is only about 15.5% growth a year for the two year period. Since I believe the company is expanding capacity faster than that, then I would use at least 20-25% a year, and come up with numbers of $1.61 to $1.75. Management believes they can grow faster than the sector, so they really expect to grow 25-30% longer term.
Of course, this assumes margins hold up. But the new lower numbers being pushed by the analysts don't reflect any upside, and I think the upside is much better here. I still think the risk/reward ratio for this stock is quite good.
I still think some of the selling this last week was motivated by tax loss selling, and I bought more shares yesterday raising my position to over 9000 shares. I'm guessing we get a bounce back to the 19-20 range over the next several weeks, and that will put me at breakeven. As usual, I'm always too soon buying into a stock on these kinds of drops. Of course, I bought a few shares just before the bad news hit. But I've got my position now, and I'll try to hang on for at least a year.
Paul |
