If approved, Alimera
is expected to
quickly penetrate
this unmet market
opportunity.
Analysts at
Citigroup (NYSE: C)
think the company
can earn $1 a share
next year and more
than twice that in
2012. Meanwhile,
shares were priced
at $11 in late April
but have now fallen
below $9 in this
recent market
correction. Shares
trade for about four
times Citigroup's
2012 earnings
projection.
Action to Take
--> The
FDA is expected to
receive Alimera's
formal application
for approval by the
end of June and is
expected to give the
device fast-track
status some time in
the third quarter.
Shares should start
to rise if and when
those milestones are
hit.
Mitel Networks
(Nasdaq: MITL)
Selling telephones
and other
communications gear
isn't a sexy
business, but it
sure is profitable.
What the business
lacks in growth
prospects, it makes
up for in profit
margins -- which is
why investors
thought they
would've fared
better with which
went public in late
April and then
proceeded to quickly
lose -30% of its
value. A $14 IPO is
now a $10 busted
IPO. Shares are now
quite cheap, trading
for just five times
next year's
EBITDA.
Mitel focuses on
small to
medium-sized
businesses, which
tend to be very slow
to boost spending
after coming out of
a recession. So
Mitel is a late
cycle play, which
means we're still a
year or two away
from seeing rising
demand for its
telephone systems.
The company is
expected to earn
about $1.10 a share
in profits in fiscal
2011. Assuming sales
rise about +10% in
fiscal 2012,
analysts at UBS
think per share
profits can exceed
$1.50. Not bad for a
$9 stock.
Action to Take
--> New
investors would be
happy if shares
simply traded back
up to the IPO price,
which would be good
for a +50% gain. At
that price, shares
would trade for
around eight times
projected 2011
EPS and six
times projected 2012
EBITDA.
Crude Carriers
(NYSE: CRU)
It costs loads of
money to build the
massive ships used
to transport crude
oil. The value of
those ships tends to
rise when demand for
oil transport
exceeds supply. When
demand slows,
investors look to
the replacement
costs to build new
ships to place a
floor price on the
value of existing
ships.
When Crude Carriers
went public in
March, bankers noted
that its roster of
ships would cost
about $300 million
to replace, or $20 a
share. Asking $19
for shares in an IPO
seemed reasonable.
But in this market
environment,
investors may have
overlooked these
data points as
shares drifted lower
to around $16.
If nothing else, the
company could just
sit tight in any
economic slowdown
and sell its young
fleet of ships for
about $20 a share.
Or it could wait
even longer for peak
market conditions
when crude oil
tankers are valued
some 20% to 30%
above their
replacement cost.
(It takes a long
time to build these
ships and buyers pay
a premium to get
immediate delivery
of used ships.) In
that scenario, the
value of the
shipping fleet would
be closer to $27 or
$28 a share, roughly
+70% above the
current price.
Action to Take
-->
Shares appear to
have found a floor
in the $15 to $16
range, thanks to
that underlying
asset support. Now,
patience is required
until market
conditions unlock
value for this crude
oil transporter.
Cobalt
International (NYSE:
CIE)
The massive oil
spill in the Gulf
has hit shares of
all sector-related
plays hard,
including new IPO
Cobalt
International. Talk
about lousy timing.
Shares have fallen
nearly half since
their December 2009
IPO. Making matters
worse, Cobalt is
still in the process
of developing its
deepwater energy
fields and is
unlikely to post
meaningful sales
growth until 2012
and robust profits
until 2013. The good
news: the current
moratorium on
deepwater drilling
should be lifted
long before then and
the money raised in
the IPO should tide
Cobalt over until it
reaches
profitability.
Action to Take
--> This
stock is washed out
with little support.
But the company's
energy fields are
worth a collective
$18 a share
according to
analysts at
Goldman Sachs (NYSE:
GS). If
investors can ride
out this storm, they
may be looking at a
+150% gain several
years down the road.
