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As Buffet or someone said (more or less), short term it's a popularity contest, long term it's a weighing machine. I can wait.
Creative accounting at its best.
Is anyone here interested in facts and rational analysis?
Try this method. PEIX just increased their holdings by 1/3 at a cost of $4.5 million. That means the holdings they had before today were worth $13.5 million, or 17 cents per share.
Logical and fact-based.
What would make anyone think this hotpennystock guy has any better insight into a stock's value than yourself? What he has is a promotional website. And I congratulate him for finishing his degree.
I, on the other hand, have an MBA from a well known university and have been analyzing stocks since 1985 and trading for a living since 1996. Who you wanna bet on?
My posts with info on the hotpennystock guy have been removed, probably because they held personal information. This info is easily available online. Check it yourself and see why the PEIX analysis is not sound.
Then, look at the prices of the stocks he has recommended in the past. Not a pretty picture. He is a stock promoter and says so openly on the record.
Investment analysis from a penny stock website. Uh boy.
I wouldn't enjoy it, but I can withstand it. I'm quite confident in my valuation, although the market can mis-price stocks for extended periods of time.
That's why I never put too much into any single investment.
My plan is to cover when the market price resembles a reasonable valuation.
About $1.40
Where did I get what information? The plant value? It's a simple calculation.
The company just paid $4.5 million for 7%. That values the 20% they already own at $13.5 million. 77 million shares. Makes the value of the 20% about 17.5 cents per share.
This is what is known as investment analysis.
The purchase today means that PEIX value of it's 20% ownership is $13 million or about 17 cents per share.
The rest of the business maybe worth $25 million or 30 cents per share.
Total value = $0.50 per share.
Optimism has no place in successful investing. Cold, hard realism is the only way to profits.
Exactly - I agree. I have seen very respectable people lose their moral compass entirely when faced with business pressures.
I try to be polite to everyone - although I often fail when people are nasty to me. I wish there could be a message board where polite and reasoned discussion could exist - but that is just a dream.
No, I don't have all the facts - but I've been analyzing stocks for a long time. I'm very confident long-term - short-term almost anything could happen.
I know this: not one investor would buy this company (as in a buyout) at anything close to the market value of the stock. You could buy the same thing for less than half the price.
I have heard that you can buy shares in the private PE Holdco at more or less the right price - if that is true and published, watch out below.
I apologize. The tone was not intended for you, but to those who abuse me verbally when I post.
I'm motivated by my short position. Just like you guys are motivated by your long positions.
I, however, use factual information and reasoned argument to come to my investment postion.
Eugene is a nice place.
Due to the fact that PEIX owns only 20% of the ethanol plants, even a very favorable crush spread would have a muted effect on earnings. Their ethanol production is really quite tiny .. Maybe 30 million gallons this year.
Of course, they report a lot more, but that's because they consolidate the other 80% into their own financials, which I find confusing, at best.
Every 10K certainly has Risk Factors, but most don't say that profitability is completely out of managements' control.
My point is that this is a commodity business. There's no brand name, no special technology. It will rise and fall based on the vagaries of commodities markets. Right now it's on the rise. When margins narrow again, it will fall - in fact it will fall before margins narrow as the market anticipates the future.
The stock is simply over-valued by any reasonable measure.
The key phrase is "assuming continued positive gross margins".
But margins are currently quite high and, judging by past patterns, unlikely to stay there.
And even with these higher margins, PEIX struggles to make a profit. Take away the $4 million accounting adjustment in Q3, and they were breakeven. Probably do better in Q4 as margins have increased, but it's simply not sustainable.
There's a reason ethanol plants are valued at about $1.25 to $1.50 per gallon of capacity. There's no good reason for PEIX's plants to be valued at $2.50. It's simply over-priced.
from PEIX 10K:
"The results of operations of the Pacific Ethanol Plants are highly impacted by commodity prices, including the spreads between the cost of corn and natural gas that they must purchase, and the price of ethanol and WDG that they sell. Prices and supplies are subject to and determined by market forces over which we have no control, such as weather, domestic and global demand, shortages, export prices, and various governmental policies in the United States and around the world. As a result of price volatility for these commodities, our operating results may fluctuate substantially. Increases in corn prices or natural gas or decreases in ethanol or WDG prices may make it unprofitable to operate the Pacific Ethanol Plants. No assurance can be given that corn and natural gas can be purchased at, or near, current or any particular prices and that ethanol or WDG will sell at, or near, current or any particular prices. Consequently, our results of operations and financial position may be adversely affected by increases in the price of corn or natural gas or decreases in the price of ethanol or WDG."
"Our operations and cash flows are subject to wide and unpredictable fluctuations due to changes in commodity prices, specifically, the price of our main commodity input, corn, relative to the price of our main commodity product, ethanol, which is known in the industry as the “crush spread.” The prices of these commodities are volatile and beyond our control. For example, from January 1, 2009 through December 31, 2010, spot corn prices on the Chicago Board of Trade (CBOT) ranged from $3.01 to $6.29 per bushel, while CBOT ethanol prices ranged from $1.47 to $2.38 per gallon during the same period. However, the volatility in corn prices and the volatility in ethanol prices are not necessarily correlated, and as a result, the crush spread, as measured by CBOT prices, fluctuated widely throughout 2009, ranging from $0.06 per gallon to $0.68 per gallon, and during 2010, ranging from ($0.09) to $0.47.
As a result of the volatility of the prices for these and other items, our results fluctuate substantially and in ways that are largely beyond our control."
This is from the BIOF 10K, but applies to any ethanol producer.
I don't see that article posted. Please provide link or post number.
Also, advise you proofread your posts before submitting as they are becoming quite incoherent.
That article was dated two days ago and had the most recent ethanol futures prices in it. It was about the most informative thing this board has seen in the last month.
You criticize my post because you simply do not want to see any information, be it factual or not, that tends to lessen the attractiveness of PEIX.
If I correct out and out falsehoods such as that book value statement I am criticized. If I post a piece from a respected agricultural journalist, rather than a know-nothing seeking alpha writer, I am critized. The common thread is that any post that presents factual information that reflects poorly on the stock is criticized, regardless of its veracity or relevance.
I have an idea - let's discuss facts rather than the other poster.
The fundamentals speak for themselves here - PEIX is worth $0.50 max.
P.S. If you prefer that my information not be posted then you would be wise to stop replying to my posts as you only motivate me into posting again.
Which is more useful?
1. A recent news article from a respected newspaper completely on topic and never before posted here,
or
2. your post which had no information?
We shall let the readers decide.
Ethanol margins to fall
Blender credit will expire at year's end
5:04 PM, Nov. 26, 2011 |
Comments
Ethanol producers will lose about 25 to 30 cents per gallon on operating profits when the tax credit for blenders goes away after Dec. 31.
The December futures price for ethanol held in the $2.55 per gallon range last week, about the same as the futures price for gasoline.
But into January, the contract for delivery fell to $2.23 per gallon last week while gasoline stayed in the $2.55 per gallon range.
For Iowa’s ethanol plants, margins have been strong in recent months. Statistics by Iowa State University show the average plant has cleared a margin of 46 cents per gallon on ethanol production through October.
The strong demand for ethanol, generated by high crude oil prices, has made 2011 a good year for ethanol producers in what is normally a thin-margin business.
So there is some cushion for Iowa’s 41 ethanol plants, which account for about 3.7 billion gallons of the 14 billion gallons produced nationally. In Iowa, ethanol plants chew up about 60 percent of Iowa’s 2.3 billion bushels of corn, but they also produce a byproduct for livestock feed.
“Margins will tighten, no doubt about that,” said Walt Wendland, president of Golden Grain ethanol plant at Mason City. “When the blender credit goes away, there will be a compromise on demand.”
Wendland, who also is president of the Iowa Renewable Fuels Association, won’t shed tears on New Year’s Eve at the expiration of the tax credit.
The 45-cent per gallon tax credit went not to ethanol plants, but to oil refiners, pipelines or fuel distributors. But ethanol took the ever-growing political hit.
“We were getting tired of being beaten up politically over ‘subsidies,’ ” Wendland said. “The oil industry still gets tax breaks for production, and then took the ethanol credit as well.”
Wendland also thinks the price of ethanol was probably higher than was sustainable anyway. Ethanol’s market economics work best when it is priced below gasoline, giving retailers incentive to offer it as a lower-cost gasoline.
Wendland said Golden Grain will have its best year since 2006, when ethanol prices soared above $3.25 per gallon in the first blush of demand after passage of the renewable fuel standard a year earlier.
Since then, ethanol has had an up-and-down existence, as prices have shown the same volatility as crude oil. Ethanol futures prices have ranged between $1.60 per gallon and $2.80 per gallon in just the last year, and the cash prices often are higher.
In the days before Thanksgiving, Iowa’s rack, or cash, price soared above $2.90 per gallon as blenders put fuel into the system to accommodate holiday driving.
But some in the business think that demand for ethanol has been strong because blenders want to take as much advantage as they can before the tax credit expires Dec. 31.
“I wouldn’t be surprised at that,” said Wendland.
The anticipated discount for ethanol to gasoline should help maintain demand, Wendland said.
“ The price of ethanol has been a bit too high, anyway,” said Wendland.
The expiration of the ethanol tax credit was one of the few sure things in the politics of deficit reduction in Washington, D.C., this past year. Congress heeded complaints from livestock feeders, grocers and food processors and humanitarians with food vs. fuel concerns. Their complaints became louder when the price of corn doubled from $3.50 per bushel in mid-2010.
“The tax credit simply wasn’t worth the trouble any more,” said Wendland. Most ethanol trade and lobbying organizations said in 2011 they would give up the tax credit willingly.
More crucial to maintaining demand is the federal Renewable Fuel Standard, passed by Congress in 2005, that will require the use of more than 13 billion gallons of ethanol.
Fortunately for Iowa’s 41 ethanol plants, which generate about $14 billion per year in revenues, the renewable fuel standard will remain in place.
Ethanol plants will produce more than 14 billion gallons this year. The surplus will go mostly to Brazil, which has become an ethanol importer after problems with production of the sugar cane that is the feedstock for its biofuel.
The Renewable Fuel Standard raises that mandate to 36 billion gallons by 2022, although that target appears more distant because after the first 16 billion gallons, the next half of the mandate must be met with non-corn biofuels.
Those advanced biofuels are still mostly in laboratories such as Iowa State University’s Biocentury Research Farm west of Ames. Plants that make fuel from corn leaves and stalks in Emmetsburg and Nevada won’t come on line until 2013 at the earliest.
The political future of the Renewable Fuel Standard is murky.
This year a bill introduced by Rep. Bob Goodlatte, R-Va., would partially waive the ethanol goals when corn surpluses, which since mid-2010 have dropped from more than 2 billion bushels to less than 1 billion bushels, fall below certain levels. Goodlatte’s bill, if it were law, would trigger a 25 percent reduction in the Renewable Fuel Standard this year.
Ethanol backers counter by arguing that without the mandate, the alternative fuels industry could wither away if there is a too-long delay to the development of the next generation of biofuels.
That argument may get more heated with the possibility that natural gas may become a more widely used transportation fuel, at least for trucks, thanks to major increases in gas production.
http://www.desmoinesregister.com/article/20111127/BUSINESS01/311270026/1029/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+desmoinesregister%2FBusiness+%28DesMoinesRegister.com+-+BUSINESS%29
OK, I simply don't have time to keep up the banter. I've put forward some facts. I realize they will disappear into the fog of misinformation posted repeatedly.
I did my little part for fact based investing. I'll be back when/if the mood strikes.
It's a commodity company with 40 million gallon capacity. Worth about $60 million minus the debt.
Brazil had a weak sugar harvest, which certainly has helped US ethanol exports temporarily.
It's all just a commodity peak, which is likely to be followed by a valley.
The company is worth what it costs to build plants, plus a smidgen of value for their sales and management services.
P.S. There is no need to engage in personal attacks.
That post is incorrect. It's important to base investments on correct information, not bad information.
Here are the errors in the post:
It says Book Value is $112 million. But that value includes the 80% of the plants that PEIX does not own. Book value is really $27 million.
Unfortunately, PEIX accounting consolidates all of the plants into their financials, even though they own only 20%. It's confusing, perhaps misleading. That 80% that they don't own is noted as "noncontrolling interest" in the excerpt below.
Total Pacific Ethanol, Inc. Stockholders’ Equity (Deficit) 27,062
Noncontrolling interest in variable interest entity 85,067
Total Stockholders’ Equity 112,129
The other error in the post is that $112 million equates to $4.36 per share. That implies 26 million shares. But that's before the convert of debt into 50 million shares. There are now at least 77 million.
So, 4.56 is wrong on two counts. The correct book value per share is $0.30.
The improvement is due to the recent improvement in ethanol margins. Those margins depend upon commodity prices, and are completely out of the control of PEIX.
When margins are up PEIX does well, relative to their past bankruptcy. When they are down, PEIX does poorly.
There is no improvement in the business other than recent commodity margin improvements.
I would prefer that you do not ignore the post and answer it respectfully.
Answer a simple question, please. What is PEIX book value per share? And what is the calculation that you use to get that number?
Pretty basic, factual stuff.
Magnetar,
What is book value per share for PEIX?
"PEIX - And even with that, we are way under book value of 4.50+"
Young man. Book value from the 10Q is $27 million. Shares outstanding are 77 million. End of story.
Any other calculation is simply not valid. Especially in PEIX' case which has 5x the number of shares (adjusting for the reverse) as it did a year ago.
Book value is a specific accounting term with a specific definition. In this case an investor would be paying $1.30 for 30 cents of book value. 4x book.
And it's not like this is some hot tech stock or something, where book value has less meaning. This is hard plants that can easily be replicated for just about that book value number.
The stock is worth what the plants are worth, about 30 cents per share.
PEIX holds only 20% of any of the plants.
My information comes from the 10Q.
Book value $27 million (including Madera, btw). Shares outstanding 77 million.
See for yourself. All facts.
TOS Violation - personal attack, not about PEIX.
Your yahoo link says book value is $0.56 per share. Which is out of date as it is now $.30 per share.
I see nothing about $4.50 per share. Why is that misinformation being posted on the boards?
Book value is not $4.50 per share. It is $0.30 per share.
Where do you get your information?
Book value is $27 million divided into 77 million shares, about 30 cents per share.
That is at best a mistake and at worst a self-serving lie. Book value is NOT $4.50 per share.
Don't see any of you mentioning that PEIX shares have diluted from 12 million to 80 million in under one year.
Nor that 50mm shares were used to retire that $35 million.
Nor that PEIX owns only 20% of the ethanol plants.
Nor that Q3 earnings all came from an accounting adjustment.
Nor that ethanol margins are about as high as they can go right now.
All I see here is pumping. Pump, pump, pump. Facts be dammed.
Wow, you certainly do look on the bright side!
The $2 million is annual. Adds 3 cents eps annually, best case. And that's when margins are favorable. The ethanol business stinks.
Stock is worth about 30 to 50 cents.