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LMI Aerospace Inc. Message Board

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  • jagad5 jagad5 Jun 18, 1999 1:24 PM Flag

    It's not your fault

    I see two weaknesses in some of the recent posts.
    The most obvious is the common assumption that the
    market is efficient, i.e. the stock price reflects the
    fair value of a company. If the market always
    reflected the fair value, there would be no chance to beat
    the market. The market for IBM is not efficient. Why
    do you expect the market for LMIA to be
    efficient?

    The second is a little more speculative on my part.
    Many have complained that there are few announcements
    about new contracts. Since LMIA signs 10 year sole
    supplier contracts with its customers, could it be because
    they don't announce new work on those current
    contracts? I suggest you take a look here for a list of
    recent new business requiring support from LMIA.
    http://biz.yahoo.com/n/b/ba.html

    This includes Boeing's 20 year projection at
    http://biz.yahoo.com/rf/990614/fj.html

    If 1998 gives a valid indication of the relationship
    between Boeing and LMIA, (Revenue comparisons of $56.2B
    vs $59.2M), we can estimate that over the next 20
    years LMI will get about $883M worth of business, just
    from Boeing.

    The $883M is $1.38 Trillion * 50%
    * 59.2/56200 (ratio of LMIA/BA sales) * 85/70. This
    crude estimate assumes that LMIA is able to maintain
    the long term sole source contracts it already has
    with Boeing and that Boeing continues to increase
    outsourcing from approximately 70% to 85% per plane.


    That translates to an average of only $44M per year,
    not so great. But the estimate ignores a significant
    fraction of the current business from Lockheed-Martin,
    Gulfstream (which actually is LM now), Northrop or any of
    the other airframers it already works with. It
    ignores that current potential for future work with
    Airbus, the JSF, and Bell Helicopter. It may ignore
    aftermarket opportunities, though the LMIA/BA ratio may
    account for that indirectly.

    For those of you who
    disagree, please point out errors in my facts and in my
    logic. It doesn't take a rocket scientist to foam at the
    mouth and call me stupid.

    JAGAD5 (rocket
    scientist)

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