Forum Archive Index - October 2000

["Steve Moxham" <stevemox@e3.net.nz>]

By looking at those figures you can evaluate that the business they're in is difficult, or that the management is bad! Perhaps they're typical of what you could expect to see in a commodity based business subject to swings and cycles of supply and demand.

You're right - for share price appreciation, future earnings expectation is what matters. That and any special circumstances. e.g. a possible capital repayment or take over for example. However, looking at past ROE figures can give you an indication of what you might expect in the future (i.e. nothing special), barring any radical change of business that saw CAH turn itself into a Baycorp overnight. =)   

I would suggest that this company wouldn't be a long term hold for your portfolio, but rather a stock to pick up at the bottom of the commodity cycle - or where market sentiment has excessively discounted it below fair value - to hopefully sell somewhere near the top.