Two days after the company reported a big earnings miss Tuesday, the stock is already down more than 12%. And yet, despite the miss, two investment bankers (FBR Capital and Jefferies) came out with upgrades on the stock Thursday. Nor are they the only ones enthusiastic about FMC’s potential to bounce back.
On Thursday, FMC COO Doug Pferdehirt filed a Form 4 notification to the SEC describing a sizeable purchase of FMC stock he had just made — 30,304 shares, bought at an average of $33 per share, for a total investment of just over $1 million. That’s roughly six months’ salary for Mr. Pferdehirt, according to data from Yahoo! Finance.
What does it mean to you?
Should you follow his lead, and make an investment in FMC of your own? That depends.
On the one hand, FMC shares have been beaten up badly this past year, losing nearly half their value. On the other hand, this steep downturn in the stock has left FMC shares looking kind of… cheap. Based on trailing 12-month results, the shares currently sell for just a 10.7 P/E ratio. And given that analysts expect FMC to post roughly 9% average earnings growth annually over the next five years, 10.7 times earnings probably isn’t a lot to pay for that kind of growth.
That’s assuming, of course, that the analysts are right about the growth returning. In fact, last quarter saw FMC’s profits cut by more than half, as earnings per diluted share plunged from $0.95 in Q2 2014, to just $0.46 per share in Q2 2015. With sales likewise continuing to trend downwards, this situation could get a whole lot worse, before it gets better.
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