Today it was brought to my attention that Ardour Capital Investments LLC has produced a report on Cereplast Inc., featured in our micro cap index. The report also came along with an upgrade from a Hold to a Buy rating. Ardour’s buy rating definition is as follows: company considered to possess outstanding growth prospects by the covering analyst. Metrics will include an expected common stock appreciation of at least 20% for the intermediate future. This expected appreciation will be substantiated by a clearly defined and prominently displayed valuation methodology.
Ardour Investments provides a price target of $6.00 based on a 10 year DCF Model with a 15% discount rate and an 8x terminal EBITDA Multiple. There were three developments that relieved the concerns of analyst which include 7.5 million in finance, a restructuring plan, and a diversification of markets. The new round of financing totaling in $7.5 million will aid the liquidity of the company and allow it to grow further through dependability and credibility with suppliers and end users. Second, it was noted that CERP’s 2009 restructuring plan was a positive strategic move allowing for a leaner corporate structure and better margins. Last, the analysis highlights the diverse product line citing CERP’s compostable and bioplastic resins as viable, demand worthy products.
All of these factors have aided Cereplast’s growth but it would seem that macroeconomic headwinds have suppressed much of the company’s efforts. Risks in the future for CERP can include prices of key commodities, strength of the overall economy, changes in consumer spending, emergency of new technologies and increased competition (all the usual suspects)
If you will notice the chart, the company has fallen from highs of mid $30.00’s and has since closed in the mid $3.00 range, hence a buy has been recommended at what is seemingly the bottom to a company with liquidity and a diverse product line.
To view this article at World Market Media click on the link below: http://www.worldmarketmedia.com/779/section.aspx/1962/post/cereplast-recieves-buy-rating-from-ardour-capital-nasdaq-cerp
Disclosure: no positions