lentinman: ERS certainly has been weak lately and it will be interesting to see if it drops much further. But it's very cheap on a PE basis for an AMEX stock showing strong growth. Fully taxed EPS of $0.48 in the 1st half, up sharply from the prior year, for a foward PE of around 8 at today's close of $7.95. On a value basis it has plenty of appeal over the vast majority of listed stocks.
Of course, maybe the selloff reflects a change in the fundamentals, perhaps a cyclical downturn in the business, but hopefully it's just technical. That's the risk of investing. ERS looked very weak technically earlier this year when it dipped from 5 into the 3's, but it proved to be a great bargain at the time ....
As for the debt/equity ratio, long term debt is always used for that measurement. On that basis, ERS has virtually no debt, and the D/E ratio is only 0.1.
As for short term debt, ERS is a distributor of aluminum products. Like virtually ANY distributor they carry a lot of short term debt on the books which is offset by accounts receivable and inventory. That's an entirely normal business model for a distributor. The current assets and liabilities are all highly liquid. There's no risk in that.
As for the issue of cash ... that's just another liquid current asset ... it means very little in this business model. It would be inefficient for them to hold a lot of cash in lieu of inventory. To maximize ROE, a Company, most especially a distributor, needs to put its cash to use, not stick it in the bank ! I'm very glad they don't have a lot of cash.
Insider ownership is higher than I'd like, and the CFO sold a block of shares recently in the 12's, which proved to be good timing. But as a percentage of insider holdings, the selling has been very modest. I view it as normal, healthy, well deserved profit taking. But hopefully we won't see much selling with the stock down in the high 7's.
AI
