...earnings potential at normalized commodity levels is $3/share (assumes oil at $100/barrel, natural gas at $6, coal at $31, etc.)
....company is investing incremental capital well below its cost of capital (IMM has generated negative cash "owner" earnings over the past five years (see "investing.businessweek.com") and Rowan's mining ops will at most contribute 7% return on capital)...if Joy is this desperate to invest its cash there must not be many other opportunities out there.
.....maximum earnings potential for 2013 is $4/share assuming normalized commodity pricing (while we may get a commodity "scare" in the next few months, commodities should at best normalize back down by 2013)...this is true whether or not analysts estimate $8/share and even if company reports $7/share for one more "windfall" year.
$4/share divided by a moderately leveraged weighted average cost of capital of 11% = $36/share
Perhaps by 2015 if commodities remain firm (and thus demand for mining equipment remains firm), Joy can get up to $5 to $6 in earnings power and be worth $55/share maximum.
If you don't believe me on any of this, good luck and keep watching (if I end up being right - and that is no guaranty, it will not be a straight line down and the stock will most likely bounce all over the place, even perhaps back up to $100 area briefly).
I am truly only posting this to help those that seem understandably confused on the recent share price action. I was short JOY but have covered and have instead shorted other names that are much more overvalued (Joy may only fall back to $55 and stay there for three years, and that is no more exciting than shorting the stock market right now imho).
Quote from Motley Fool:
"Jumping for JOY....
Good cash flow, good earnings growth. Supporting companies expected to grow earnings by 11[%]-20% in the next 5 years. Joy and [Caterpillar] can compete and not kill each other because there is enough business to go around. ... Price target of $150 if the company reaches earnings for 2012 and the P/E expands to meet projected earnings growth of about 20%. "
Just bought alot more.
I tried to warn everyone in March, but look at the disbelief in the comments above.....further, now, as of May, everyone is still acting "confused" as to how this stock can trade where it does....just goes to show you how worthless this board is for trying to post helpful comments.
Let me reiterate that this stock will bounce all around (will probably trade up one more time, then back down) but will settle at best at its then earnings power value.
CMG, CLG and PNRA, however all have strong momentum so best to wait for the turn....the thesis on CMG an PNRA is a return to normalized profit levels (we are well above such levels) and new store growth only imply valuations far below current levels (and no earnings growth from 2012 estimates)......CLG's 2014 eps appear 2x more than achievable unless oil is going to $200/barrel
i wish i was brave enough to have shorted the name.....given that there are only two companies in the world right now that do what JOY does, and that the other was purchased for the equivalent of $102/share for JOY, I simply could not short the name (as I said in my prior post)
as to the $7/share in October 2012 annual guidance, the market is a forward looking mechanism, and it is already starting to look into 2013....as i also posted, this will be a bouncy ride to fair value, but fair value is somewhere around $45 this year and $50 next year (unless there is a stupid strategic buyer out there, and there always seems to be one right around the peaking of the equity market)
What I am amazed at (virtually always) on these posts, is that you try to provide helpful, and quite detailed analysis to folks, and no one listens.....hopefully most of you got out of this name last week when I told you to.....there is always a chance that someone buys these guys, but I would not bet on it at this juncture.
Good luck all.
Please review the depth of content from each of our posts as you pass judgement.
JOY could very well be back at $85 by April 4th. I am not claiming to know the timing of when the stock will return to what it is worth.
I am telling you that it is not worth $75/share or $85/share, but is worth $55-$60 maximum in a few years. It is also only worth $35-$40 today. The only thing that would change the valuation is a sale of the company, which is entirely possible (which is another reason that I would be careful being short the name, in addition to be being careful being long the name).
Good luck, and you sure have a funny way of saying "thank you."