I guess debt doesn't worry me if it makes
sense. For instance, I like YUM, which has
negative equity and debt equal to its market
cap. I've got a call into BMC now to
inquire some more about Orcolite's operations.
BMC's $275M line of credit from Bankers
Trust is a clue that their business plan is good.
Looking at the specifics, cost of sales jumped
this past Q, driving gross margins and EPS
down. However, there is good explanation - the
startup costs at Cortland, which is slated
to produce computer monitor masks, which
are BMC's fastest growing line at 125% yoy.
BMC states all other lines enjoyed
gross margin expansion. IOW, I don't
see the business falling apart, which is my
first criteria with leveraged companies.
The optical product line had 7% sales
growth, though certain aspects of it
enjoyed 25% growth. I'm not sure where
Orcolite fits into the growth/margin
spectrum. I'll have to wait to get more
info.
An analyst downgraded the stock and cut
earnings estimates for this Q this week,
accounting for the weakness. Seems to
me we knew they weren't going to hit
0.42 already.
Mike |
