I only wish I could agree. Unprofitable today and carrying $1.8 billion in debt-net-of-cash — $500 million more than its own market cap — MEMC Electronic is waltzing its way down the road to ruin. Even if one segment of its business is “cash-flow positive,” the company as a whole is generating negative cash flow. Factor in capital spending and the company burned nearly $750 million last year.
Like its “old energy” rivals, MEMC is debt-heavy and cash flow light — and headed lower.
Sociedad Quimica y Minera (ADR) (NYSE:SQM)
Finally, we come to Chilean lithium miner Sociedad Quimica y Minera (ADR) (NYSE:SQM), whose products are instrumental in the making of lightweight rechargeable batteries, and whose name translates as “Chemical and Mining Company of Chile.” SQM disappointed investors Tuesday with a report of $0.54 per share in profit. The good news is that it actually did earn a profit. The bad news is that, according to StreetInsider.com, it earned $0.08 less profit than Wall Street was hoping for.
This performance won SQM a prompt downgrade to “neutral” from analysts at Miller Tabak. Personally, though, I’m even less optimistic than the analyst.
On the one hand, SQM is probably the least overpriced of any stock mentioned in this column so far. Regardless, at 22 times earnings:
The stock’s overpriced for the 14% annual long-term growth that Wall Street estimates.
It failed to grow earnings at all last quarter, shrinking instead.
And — as you can probably guess by now — free cash flow isn’t up to snuff here, either. In fact, the $313 million in cash profits SQM produced last year were less than half its reported $649 million in “net income.”
Long story short, I wouldn’t buy any of these companies today. Not a single one.
The article This Just In: Upgrades and Downgrades originally appeared on Fool.com and is written by Rich Smith.
Fool contributor Rich Smith has no positions in the stocks mentioned above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he’s currently ranked No. 316 out of more than 180,000 members. The Motley Fool recommends Petroleo Brasileiro S.A. (ADR) and Sociedad Quimica (NYSE:SQM) y Minera (ADR).
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