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Thursday, December 20, 2012
Friday, December 14, 2012
Wednesday, December 12, 2012
Volume 3 - Petroleum, Natural Gas, Chemical Specialty Coal-
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As an example of an overvalued stock, CNX has estimated earnings of $1.10, well below normalized earnings (MPEPS) of 2.01. On the basis of the latter, the stock is overvalued by 48%. To be fairly valued it would need to earn $3.18 (IEPS). At that level it would have an implied Reinvestment Return of 17.2% vs the current Reinvestment Return of 9.7% based on MPEPS.
As an example of an overvalued stock, CNX has estimated earnings of $1.10, well below normalized earnings (MPEPS) of 2.01. On the basis of the latter, the stock is overvalued by 48%. To be fairly valued it would need to earn $3.18 (IEPS). At that level it would have an implied Reinvestment Return of 17.2% vs the current Reinvestment Return of 9.7% based on MPEPS.
The required normalized RoE to breakeven is 20% which does have precedence during the secular decline starting in 2006. The question is will it happen again in time to justify the stock price of this coal and natural gas company.
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