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  • purduepete83 purduepete83 Dec 19, 2005 7:39 AM Flag

    What am I missing?

    The #'s on this stock look too good to be true. Forward PE of 5.2, PEG Ratio of .18, Price to sales of .4 and earnings growth >10%. It seems the market has not yet fully valued this stock with their recent acquisition. It looks like an easy double in the next 18 months as the truck lines are all running their fleets at full capacity which will mean a lot of new trucks and upgrades to existing vehicles over the next couple of years. They have a lot of debt but are reducing it significantly each quarter as cash flow is very positive.
    What am I missing here?

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    • Don't forget about the debt. $712M LTD minus their cash nets out to about $20/share in debt. If you add that onto their share price the resulting debt-adjusted PE ratio is in the neighborhood of 15. Not terrible, but definitely not the bargain the raw PE ratio suggests.


      BTW: "Go boilers!"

    • IMHO you aren't missing much. The high debt is the largest negative and of course they are addressing that aggressively. Next concern would most likely be the economy itself and truck sales etc. which I am comfortable with.

      Basically it is my contention that the market has not discovered this stock or they just don't believe the story. The one mention in Barron's didn't really move it.

      If it will only come back down to $12 I will add to my position.

      good luck

    • Not sure by what you mean by what are you missing. What's the particular concern? The point of a good company is to realize profit and once that is done, reinvest in itself. Thus, the debt. As the levered cash flow tends toward zero, I would expect the stock to start working for us. The trading needs to pick up a bit. This is the perfect time to get into a stock like this one because when the trading does start hitting 200k a day, we'll be sitting pretty.

      I view investing as empty boxes. Some companies are overvalued and thus they have filled their boxes and it's overflowing so stuff falls out. Other companies are under valued and can ligitimately support a higher price and their box is partially empty. I like investing in the partially empty boxes. The problem with these are that you have to be careful that you're investing in it at the right time if you want a quicker return.

      Hopefully, many industrial trucks will break down this winter. and pray for rust on that farm equipment and for shot brakes that they put off from the previous year. :)