Ok, I'm not a financial guru, expert, or even really well informed. However, one of the local stocks I follow is Paetec. I follow them because they're local, they're theoretically growing, and they're building a brand new corporate headquarters in downtown Rochester. I also own a whopping 140 share, that I purchased at $1.54 per share. That was an initial investment of only $215.60 (that includes the cost of the trade).
Today, their stock is hovering around .82 cents. That means that my 140 shares are currently worth a whopping $114.80. Now, on a personal basis, this isn't a big deal. It's basically a hundred bucks. I'll probably blow that on two or three reasonable bottles of wine in the not-too-distant future. However, look at things based on the total number of outstanding shares.
Paetec currently has 146,070,000 share outstanding and a market cap of just under $120 million. Their 52-week high was $12.75 per share. So, do the math and at that time the company had a market cap of $1.86 billion. My question is, is Paetec a $120 million dollar company or a $1.86 billion dollar company? Tomorrow they release their 3rd quarter earnings report, so that should be a good indication of at least the recent past, and may provide some guidance on the next few quarters. And we know that the economy is bad, so that undoubtedly plays a role in things. But did this company really lose $1.74 billion in value over a 52-week period? Oh, and while I haven't done the research to prove it, I'm pretty sure that the stock has only been trading as PAET for about a year.
I'll be very interested to see what they report tomorrow, but no matter what it is, I can't believe that they suddenly became only a fraction of their previous value on anything other than an emotional response to the market and the short-term belief that telecom is going bust (again). Given that the market and the overall economy moves in a cyclical pattern, this could be one hell of an inexpensive opportunity to buy shares in a company that I have no reason to believe is going to shut down soon.
Obviously, my own little personal stake is that if PAET goes back up to $10 a share I suddenly have $1400, rather than about $115. And, looking more broadly on Paetec's impact on the local economy and the psyche locally about how things are going, a higher stock price will obviously allay some fears that this firm is going bye-bye.
But isn't that the case with most of the big employers locally? Let's take a look at some of the other big guys in town:
Kodak - $7.44/share
Xerox - $6.65/share
Corning - $9.16/share
Paychex - $25.33/share
Harris - $33.48/share
Constellation - $10.86/share
Time Warner - $8.70/share
Really? These companies are only worth a fraction of their pre-economic-shitfest valuations? Suddenly assets such as cash, intellectual property, plant and land, goodwill, etc., etc., etc., are worthless? I know there are large chunks of debt associated with all of these firms, as well as future liabilities for obligations they must pay. But talk about a buying opportunity for people. Again, I'm no expert, and maybe I'm stupid here, but Kodak at $7.44 has got to be worth less than the amount of cash they have in the bank.
Also, I wonder how hard hit a company like Paychex would be in a down economy. Sure, firms will reduce payrolls, and some will go out of business, but are companies really going to be looking to do their own payroll rather than outsource it? If anything, given the still relatively small market penetration of outsourced payroll services, I would think Paychex could significantly profit from an economic downturn if they can show small and mid-sized companies how much they'll ultimately save by outsourcing their payroll services.
I guess in conclusion, Paetec's 1-year price estimate is currently standing at $4.50/share... I'll be very interested to see if it's even close. Regardless, I'm going to throw a little more into the pot and see what happens. At 83-cents, is it much of a gamble?
