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Power-One Inc. Message Board

  • online_investor online_investor Dec 16, 2012 9:22 AM Flag

    Increase DEBT and buyback shares or PE firm will scoop it

    Power-one needs to increase debt from zero to $300M or so which makes sense given the company’s credit profile (investment grade) in the prevailing very low interest rate environment.
    All the companies are loading up on Debt now and Power-one needs act.

    This money could be used to reduce the float by 1/3 and provide shareholder value.
    With $180M in EBITDA income, debt will also help offset some of the taxes which are increasing next year.

    Otherwise, I am afraid a PE firm will buy out PWER for FREE getting $500M debt and then cash in $300M existing cash while enjoying $180M EBITDA year after year while the current shareholders are left holding a bag.

    Sentiment: Buy

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    • Well, you're certainly right about shareholders holding the bag. This has been one terrible stock despite the company doing very well. I've never seen such a disconnect and you have to wonder why management is so inept at fixing the problem. I guess they just don't give a schitt.

      • 1 Reply to mike_dotcom
      • Ford's (F) P/E ratio is like 2.5 right now. They should be a $40/pps but are not. I think it's their debt that is holding them back.

        PWER needs debt if they intend to buy another company. But why can't a company be deemed "successful" without debt? That's our culture right now - debt is good. It's troubling to want to see someone or some company that is successful go into debt to be "more successful". Morningstar shows that PWER has a 6% coupon out there now, but that's about it.

        If renewables play out, they will possibly need debt to build new factories and hire more people. That's a good reason for debt at that point. Otherwise, they need to see how the energy battle against the oil and NG company plays out.

        Sentiment: Buy