Tod:
Let complete this: (This needs to go in your DD posting as well.)
Go to this site:
wsrn.com
Enter ZEI in the symbol box. Then select QuickSource: Fundamentals, Ratios & Earning
Lets look at ZEI's revenues and profit margins for the last two years and projected for 1998.
1996 1997 1998(proj)
Rev (millions) 731 800 851
Net Income (millions) 58 59 58
Net Margin (%) 7.9 7.4 6.8
PE Ratio 10.5 8.0 8.6
Shares outstanding: 28 million.
Lets run on few quick numbers on MTEI:
Lets say MTEI has 10 million tons of coal and can extract it all. Lets say they can sell it for $25 a ton (I've giving them the benefit of the doubt). That would be total revenue of $250 million. Lets say they can extract it at a 10% profit margin. (Again giving them the benefit of the doubt since ZEI seems to have subsidiary businesses which are hurting the coal operation margins.) That would be total Net Income of $25 million. Lets also assume we have that income today, RIGHT NOW. Divide the 25 million net income by the 65 million shares outstanding and what is the income per share? 38 cents!!! Hey, MTEI is trading above that, its overvalued!
Of course, its more overvalued than that because we don't get that TODAY. It is going to take years to generate an income stream which means the intrinsic value of the stock is even less due to the time value of money. You do know what the time value of money is, don't you? (notice how I did not use the term fair market value.) MOREOVER, I've given MTEI every benefit of the doubt based upon a market comparable.
Also, we have a multi-billion dollar coal company, according to their 10-K one of the largest coal producers in the US, and they only have 28 million shares outstanding. MTEI HAS 65 million??
Now rather, than bashing a contrarian point of view, would you or anyone like to discuss, in depth, the financial analysis of this company. If you really want to know whether you are making a sound investment, I would think you and everyone would want to understand the fundamentals of the business.
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