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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Dan Meleney who wrote (38193)	6/6/2010 6:42:04 PM
From: Spekulatius	Read Replies (1) \| Respond to of 78774

re EME - i like the business (asset light, seemingly scalable) but the stock is not terribly cheap and the business has yet to bottom. Analyst prediction growth for 2011 but my concern is, if this growth is late to materialize, the stock could fall quite a bit more. I am also concerned that analyst estimate for earnings are near the top of the huge range 1.45-1.85$ that management has given this year. I think an entry below 20$ makes sense.

To: Dan Meleney who wrote (38193)	6/6/2010 8:50:27 PM
From: RumbleFish	Respond to of 78774

No, I didn't. It was just a stock that came up at the Magic Investing website. Just checking they still have it as a pick. You can register there (for free) and run scans yourself. magicformulainvesting.com

To: Dan Meleney who wrote (38193)	6/7/2010 11:27:19 AM
From: Kapusta Kid	Read Replies (1) \| Respond to of 78774

Re EME. At the moment, I'm about 40% in cash with about 90 companies on my watch list. EME is on my very short list. I quite agree with Spek's assessment of EME. "re EME - i like the business (asset light, seemingly scalable) but the stock is not terribly cheap and the business has yet to bottom. Analyst prediction growth for 2011 but my concern is, if this growth is late to materialize, the stock could fall quite a bit more" Nonetheless, here are some metrics on EME. Thin margins are something of a concern, as are declining revenues. EME has grown FCF at about an 18% rate (compounded) over the last 10 years. I come up with a FCF yield of 14.6%, which roughly corresponds to a P/FCF ratio of about 7. FCF has been positive 9 of the last 10 years. Since 2003, the only year of negative FCF, EME has grown FCF like a weed, @54% compounded for 5 years. ttm FCF dwarfs earnings by better than 2/1, so it doesn't appear that the CFO is playing games with accruals. Since 2005, the median CROIC is 19.9%, but it dropped to @15% for the TTM. EME has also grown shareholder equity at better than 20% (again, compounded) for the decade. The Morningstar financials show that the company has no long-term debt and $601M in cash. With about 68M shares outstanding, that comes to nearly $9/shr in cash. However, the number of shares has steadily increased from @54M in 2000. From MSN, the ttm ROE is 12.6, slightly lower than the 5-year value of 14.8. Debt/Equity is 0.12. EME pays no dividend. P/CF and P/S are near 5 and 10 year averages, but P/B of 1.3(ttm) is slightly lower than the 5yr (1.8) and 10yr (1.5) averages. On the daily chart, price has fallen below its 30-day MA, but the weekly chart looks a bit better, although price has dropped below both the 20 and 40-week MAs. From the weekly, I'd say it could go either way, but momentum looks lousy. Morningstar puts a Fair Value of $23 on the stock; S&P rates it a Buy; Zacks gives it a rating of 3 (hold). The Piotroski number is 6. The Piotroski # negatives are from the increased # of shares, YTY declining ROA, and YTY declining gross margins. The Morningstar Cash Flow statement also shows business purchases/investment in the last few years. In February, EME announced the purchase of privately held Scalise Industries of Pittsburgh, a 60 YO engineering firm. In January, 2009 EME acquired LT Mechanical of Charlotte, NC. EME is one of my favorite companies, but, again, I agree with Spek. I guess we're talking about a cyclical here and the stock price is something of a falling knife at the moment. There have been a slew of contract awards in the news, but the CEO of the last 16 years is scheduled to retire in January. He will be replaced by the COO, who has been with EME since 2004, about the time the company's fortunes turned up significantly.