|Shares Out. (in M):||0||P/E|
|Market Cap (in $M):||440||P/FCF|
|Net Debt (in $M):||0||EBIT||0||0|
|Entry||04/24/2006 05:35 PM|
|I assume the relationship is fairly direct between aluminim prices and revenues? Is there a particular grade you use to track this.|
I understand this is distribution biz but how do you think about chance of higher op income from greater absolute $ leveraging the SGA base.
|Entry||04/24/2006 06:10 PM|
|Any idea where to find stock? So far no luck on our end...|
|Entry||04/24/2006 10:53 PM|
|How much of the $ volume increase in revenues in 2005 vs. 2004 was due to higher steel prices and how much was due to increased volume? Thanks for the idea|
|Subject||Aluminum prices/ scott265|
|Entry||04/25/2006 09:38 AM|
|Traditionally ERS has enjoyed almost a 2:1 operating leverage in their business model. This has not been not been case the last two quarters as it appears they are having a harder time passing their commissions on to their customers in the face of sky high aluminum prices. Last quarter, for example, operating margins dropped by almost 20% versus the previous quarter. Operating margins dropped in Q3 as well. I believe this trend will continue in the coming quarters if aluminum prices continue to rise.|
|Entry||04/25/2006 09:39 AM|
|Volumes shipped last year were up 35% while sales were up 68%, so increased prices for aluminum accounted for roughly half of the revenue increase.|
As for "what went right" last year, remember that free cash flow in 2005 was actually meager. Overall, 2005 was fine....if ERS were still trading under $10. But the stock is trading over $45 currently and has to be considered outrageously overvalued compared to its peers, even on a trailing PE basis. When you consider how feeble ERS's current growth trajectory is, the stock's valuation looks even more appalling.
|Entry||04/25/2006 09:40 AM|
I've found shares to short at Interactive Brokers.
|Entry||04/26/2006 09:09 AM|
|thanks for the idea and i agree that it seems overvalued. That said, can you explain why their earnings have increased so much in the past few years? Is it just that they take a % based on aluminum sold and so that number grows with price or is that they are able to exploit a steady inventory in a tight environment? their 10K is pretty useless as relates to these issues.|
|Entry||04/26/2006 10:28 AM|
They charge a straight commission, so as prices increase so does their commission revenue. However, it appears from their gross margins that they are having to reduce their commission rates.
|Entry||04/26/2006 12:44 PM|
I was able to get a borrow through Ameritrade today.
|Entry||04/26/2006 04:28 PM|
|why did it go up so much today|
|Entry||04/26/2006 05:02 PM|
"why did it go up so much today"
LOL. That's a very good question, Gearl. I don't really have a very good answer. I can tell you that a lot of the low floaters I was watching ran absurdly wild today, as they have the last few days....and I do think that ERS has been caught up in that mania. Couple that with metals mania and IBD mania...and, well, there's a lot of mania surrounding this pig right now.
Today certainly wasn't fun for me, with respect to my ERS position. But this stock will have its comeuppance imho.
When the company reports roughly flat earnings within the next three weeks it should become clear to even the most obtuse ERS longs that this stock is not a good way to leverage potential metals upside (even assuming that upside exists for aluminum prices, which have already run wild) and that the company is not growing (which makes its PE absolutely insane versus any comparable or semi-comparable). The metal mo-mo contingent should run screaming at the same time that the IBD mo-mos abandons the stock. At that point, ERS's low float-induced volatility should work against the stock...as the exits suddenly become very crowded.
That's my thesis and I'm sticking with it anyway. LOL
|Entry||05/02/2006 12:24 AM|
you're absolutely right about my confusing Ryerson and Hulett. I apologize for the mistake.
ERS's business model is to handle marketing and distribution for small aluminum producers. As such, they tend to be the primary customer for most of these small producers- but I don't know for certain that ERS is Hulett's exclusive distributor.
|Entry||05/02/2006 09:46 PM|
|Yeah, ouch is right. LOL|
Part of the reason for today's huge move was dissemination of buyout rumors by Briefing.com's trading service. They reported unconfirmed rumors of RYI taking out ERS at $65 when ERS was around $50, and the stock subsequently exploded.
I find this rumor to be absurd.
ERS is without question massively overvalued, to the extent that no company would pay $30 for them...much less $65. And how would RYI finance this hypothetical takeout?
RYI's balance sheet is weak- so they can't pay cash.
Their market cap is only $770 milion. O/S is around 28 million, and it would cost them about 650 million to buy ERS at $65. In other words, they'd have to pay almost their entire current market cap. They'd have to issue about 20 million shares, taking their o/s up by 70%.
|Entry||05/03/2006 10:14 PM|
|I was quoted a 40% premium today to make the trade. |
Is this trade still feasible/viable?
The idea is compelling and the recent price increase significantly tilts the risk reward ratio in your favor . . . but getting execution . . . argh
|Subject||ERS/ IBD 100|
|Entry||05/05/2006 07:01 PM|
|Yes, IBD was booted off of the IBD 100 list. That is just a massive blow for the stock, as it now will have to stand on its valuation....which is patently absurd. |
Normally I'd predict more carnage on Monday...and that might still happen. But note that Louis Navallier's Emerging Growth newsletter- which has a huge following- picked ERS as one of its top picks this month. That will certainly bring a lot of money into the stock on Monday, and offset IBD-related selling to some degree.
So I have no prediction as to how ERS will trade on Monday. But this is extremely bad news for the stock. Even great earnings (which shouldn't materialize) won't support ERS's valuation.
The end of this week was ugly for ERS. But that was just the beginning, imho.
|Subject||mm202: great work|
|Entry||05/15/2006 07:27 PM|
|Just want to congratulate you on your great call, especially when ERS initially went against you and you totally stuck to your guns. I was going through the same thing at the time, suggesting here a short of BLDP at $10.48, only to have it trade at $13 a couple days later. ERS has practically fallen in half in less than a month since your write-up.|
This, I'll add, is a good example of why the advice one reads everywhere about the necessity of having stop losses is so bogus. Maybe stops make sense for people who don't really understand a story they are involved with, but if one don't really understand something, they certainly shouldn't short it. You knew ERS was overpriced at $45, and the fact that there were some people who were willing to pay higher does not mean that they were right; in fact, they were even more wrong.
|Subject||mm202: great work|
|Entry||05/17/2006 03:47 PM|
|Much thanks for the kind words, Bibicif. The ride on this stock got amazingly wild for a stretch there. But ERS was simply an incredible pig by any measure- so I was fairly comfortable staying the course and waiting for the market to regain its sanity. LOL |
I covered part of my short today. But I'm still significantly short here, because I expect ERS to trade down into the teens sooner or later.
I'm traveling in Europe- so if I'm late responding to any additional posts, that's why.
|Subject||I second the thanks|
|Entry||05/17/2006 05:29 PM|
|It was a lot of fun, thank you!|
|Subject||if we clap loud enough. .|
|Entry||05/22/2006 02:16 PM|
|will you come out and take a bow?|
|Subject||Covered ERS short|
|Entry||05/25/2006 09:41 PM|
|I closed out my ERS short at an average of around $20.50 over the last few days. I do think that ERS should head lower from here (this stock really has no business trading over $15, imho). But I think that the easiest money has probably been made here now...so I decided to book the relatively easy profits. |
I'm glad that some VIC members profited from the idea, and honored by the kind words from Buster736, DJ927, Bibicif87 and others.