Mercer International

Mercer International recently caught my eye as a potential value investment. It currently sells for the low, low price of 3.47x earnings. It had an excellent 2010 (looks like the “absolute best year in company history” sort of excellent) and it is wildly cyclical, which explain why the valuation is so low. It also isn’t really in the tax-paying business right now, so I’d probably want to tax-adjust that P/E. Figure a 40% tax rate, so 3.47/(1-.4) gives an adjusted P/E of 5.78. The debt load is high for such a cyclical industry (770M Euros!), but the debt structure looks like it might be less risky than it appears at first glance. Worth a bit more digging, perhaps…

Advertisements
This entry was posted in Potential Ideas. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s