[DesertCat]

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Since the value of a share of stock is at the very least highly dependent on future earnings why is an analyst that discusses "forward PE" (i.e. future earnings) a moron?


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Typically the analyst is doing it to avoid discussion how expensive the stock is today. You are right, it's that stream of future earnings that determine the stocks value. Typically, you can look at the last five years of earnings and come up with a reasonable idea of what normalized earnings and growth are. But in this case I was being unfair to the analyst, as it's growing so fast that it's history is much less pertinant to the evaluation.

But remember, it was my "thirty second evaluation.". I was only trying to find red flags for Kane, not spending hours on whether I wanted to invest in it.

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If prices drop, it may be faced with a big cash crunch, and the stock could get killed.

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This could be said about alot of companies and their products.

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It can be said about a lot of companies you should avoid. It can't be said about Coke or Pepsi for example, or Walmart, etc. There are companies that have pricing power, and built in competitive advantages. When a company's future earnings are dependant upon commodity prices, that's pretty much a "no buy" for me. I have no ability to predict price futures. In energy, I'm much more interested in owning pipeline companies at the right price, as my perception is whether gas prices go up or down, they still get paid.

This company looks like it's dancing on the razor's edge and has no competitive advantage. Great natural gas prices mean great performance. Bad natural gas prices probably hurt it bad.

But if I was to own it, I would sure spend the time to model a worst case scenario and as you pointed out, understand what prices are built into the todays price.