RJET. I'm believing it could move back up and trade at multiples of book value, either stated or tangible, where it's traded in past.
From '04 through '09 the low p/e reported by S&P has ranged from 3 to 8. The high p/e in each of those years varied between 8-12. With a current p/e of 5, and a forward consensus estimate of 3, there's some indication that RJET is cheap historically. Net income's increased every year from '00 to '08 with a 50% drop in '09.
There are some things going on here that might be considered. RJET's acquisitions which will be need to be integrated successfully, the number of shares outstanding has increased with the acquisitions, and so on.
As I read RJET's website, it seems to me it could be possible that RJET might be one of the few (?) airline companies where airline management is competent, and where they actually try to consider stockholders as one of their stakeholders.
There's no reason that I can see that RJET can't continue to be profitable and with increasing earnings. So over time, it's easy for me to outlook RJET stock back over $10. Even if the price of aviation fuel should rise and cause fear as it did in '08, I might expect the stock to fall, but not greatly so: In the bad times of '08 high oil, the stock was at $7-8, if I've got my time frame and chart right:
finance.yahoo.com
Going forward, given the acquisitions RJET's recently made, possibly tangible book value will be more appropriate to look at than stated book value. There's some evidence that looking at any book value for an airline is meaningless, because some airline stocks that have traded below book have gone bk, especially as managements have suddenly cut bv, realizing some of their planes are not worth what's on the books, or that the plane's can't generate adequate revenue. As a pivot point for me, I like to use book value. For RJET, whether it's stated bv or tangible, RJET stock trades under book value. $6.02 tangible isn't that much above closing stock price, so that has to be weighed too. Otoh, roe or return on stated book value has been pretty good, and if we place that return on the lower tangible book value figure, ROE may be very good indeed going forward.
Of course there's the Buffett story, something about where he tells Charlie Munger to have him (Buffett) committed if Buffett ever buys stock in an airline, because he surely must be crazy. I have bought some of the regional airlines and followed them right into bankruptcy, and so having lost a bunch of money here, I realize these stocks, if bought, have to be watched closely, and really can't or shouldn't or won't be long-term investments. OTOH, of the three airline stocks I bought last year and am holding now, I'm in positive territory in all three (as of today anyway). So I come to believe if these stocks (airline stocks) can be bought correctly, there are profits to be had.
Also fwiw, I control risk by position size. I find myself subject to the received wisdom that airline stocks are lousy investments, so my positions in these stocks are small. RJET too, even though I believe the odds are in my favor.
If I had only a small bankroll for the stock market, I'm not sure I'd be a buyer of RJET as my first stock choice or any choice. Otoh though, in for something good is better than out with nothing. So even a very small buy - if it works out - will at least help increase the portfolio's value. |
