I think the pricing and volume is a little too optimistic. At $6.00 it is running at a forward P/E of 24 if the company hits the top end of its guidance range. That P/E is higher than the peers. My guess is that people are factoring something like breakeven operations for the ER segment in 2017, which would drop a few millions to the bottom line or maybe they are thinking that some time in 2017 or 2018, the company will start making money on that segment. If that happens, I can see 50 cents per share earnings and $6 is a bargain. That is a big “if” in my opinion. If it keeps going this way and it hits $7.00+ I will sell half of my shares and leave the other ones to ride. My entry point is around $3 per share so I am happy.
Outlook for full year 2016 as released in February:
• Revenue to be in the range of $560 - $580 million
• Operating income of $3.0 - $5.0 million, including restructuring expenses of $1.0 - $1.5 million
• Income tax expense of $0.2 - $0.4 million
• Earnings per share of $0.05 - $0.10, assuming approximately 35 million shares outstanding
As of May the company now expects 2016 results as follows:
• Revenue in the range of $570 - $590 million
• Operating income of $7.0 - $10.0 million, including restructuring expenses of $0.5 - $1.0 million
• Income tax expense of $1.0 - $1.2 million
• Earnings per share of $0.15 to $0.25, assuming approximately 34.5 million shares outstanding
The predecessor company went bankrupt and Centrus has been around for less than 2 years. Any comparisons made to the company prior to bk is not fair as the capital structure was different. I had bonds prior to the bk and ended up with shares and new bonds afterwards. There is still a lot of issues that need to be clarified about the company but the recent announcement of contracts looks positive. Still a very risky investment. I do not plan to add to my position until I can actually do additional due diligence.
I think it is more about getting some of the uncertainty cleared up. When you look at Spartan you are looking at a business with three different revenue streams. Two of them are healthy, but the third one “Emergency Response” vehicles is in trouble. Not only is it unprofitable, but there were some significant warranty expenses with it this year. Management had a conference call yesterday and provided guidance that supports getting back to profitability this year. So in a way, they think that they have recognized most of the losses, impairments and charges and that there is no other shoe to drop.
I would go to their website and download their 2/25/16 presentation pdf and look it over as well as going over the financials. This is a good company with minimal debt. They are forecasting 10 cents in earnings per share this year, but I can see those earnings tripling or better in 2017.