Hi Andy,
I agree with you.
After a stock consolidation a stock usually drops in price, and after a split the stock goes up. But this happens only for a short while. The stock will in the long run trade at its true potential. In the case of Denison, imo, a stock consolidation will be beneficial. The following is my reasoning:
Lets say a 1 for 10 consolidation.
Total o/s shares = 32 million.
Total 1996 estimated eps = $1.
Post consolidation shares trading at $4.40 (today's closing @ $0.44)
Assigning a price to earning multiple of say 10, the stock should trade at $10. This is because, imo, there will be institutional interest (no longer a penny stock image). Ofcourse, I think 1997 earnings will be better than 1996, and the stock should trade above the $10 level (if my assumptions hold).
However, there are many who would debate that a consolidation would certainly pull the stock lower. In which case, I would be buying more.
I would like your opinion, and of any others that might wish to contribute.
Yes, the $14/lb is for U3O8. I have no idea if it is called yellowcake.
Regards, Lalit |
