AMNF,
The company is having strong results and doing all the right things, with a nice divvy and buyback. Congrats to all shareholders, especially those with the insight to buy last year. If I can convince myself that the last year and a half of results can continue indefinitely, then it is a buy.
That being said, I continue to lean toward not buying (I looked at this on earlier posts and probably missed a great buying opportunity). I have gotten burned before buying microcaps at peak values when earnings are good and then getting creamed when earnings drop back down, especially in this case when you have a microcap stock with book value around 0.17 and that was trading under 0.50 for much of last year.
The earnings on microcaps can really bounce around from year to year. This is where Benjamin Graham's suggestion of using many years to calculate earnings improves the margin of safety. The PE on this one is roughly 12 off of 2010 earnings, 17 off of 2009 earnings, and 39 off of 2008 earnings. My concern is that if, for whatever reason, the earnings revert to 2009 or worse levels, the stock could revert back to the 0.50 range.
On the other hand, maybe the earnings will remain strong or even grow from here. Does anyone have a strong view that earnings will continue to grow? If I continue to wait long enough, maybe they will build up a low long-term PE :)
Thanks,
MC |
