RE:RE:RE:Out of touch
colourama wrote:
Torontojay, given that PHA is more of a growth-by-acquisition story, do you think that the current economic environment could actually be somewhat beneficial to them, in the sense that it may be cheaper to acquire? Or is taking on more debt at this time outweigh any benefit like this?
I get that the overall market has been brutal for many, but unless there is some sort of fundamental business impairment that I am not aware of, I remain puzzled at the seemingly bottomless valuation that investors selling here ascribe to the company - a sure-fire way to suffer significant losses at a 2/3 year low.
I think the current environment is good for their business strategy by acquiring companies on the cheap. The recent drop in security valuations has given them an advantage as they are a profitable growth by acquisition company. The cash flow from these acquisitions more than offsets the increased discount rate due to the higher interest rate. I'm very comfortable with their debt service coverage ratio even though their debt is equal to their market cap. At the current rate, they would be net cash in about 3 years time and so their debt position is reasonable relative to their cash flow.
It's an absolute steal at under 40 cents!