Citrus

Risk Management for All

Just a quick ancillary comment, RMG is expensive on a P/E basis but such a basis is not the ideal way to value a stock with a considerable chunk of debt. Because of interest charges the earnings are depressed and the P/E looks high. In reality RMG is cheap. Moving up the income statement, a simple but better way is to look at EV/EBITDA. Here the stock is trading at about 13 times and that's not outrageous. The debt adds risk but considering their high cash returns they'll have no problem paying it off in about five years or so when the balloon payment is due. They generated 45 million in cash in the just completed quarter, 180 million on an annualized basis or just 1/5th of the market valuation. In fact if a full comprehensive FCFF valuation is done a target of 30 is the righty target and a P/E of 87 is not unreasonabl, it's not just about the P/E for certain companies.