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11\19 Daily Double
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Wednesday, November 19, 1997


Molten Metal Technology
(Nasdaq: MLTN)
Phone: 781-487-9700
Website: http://www.mmt.com
Price (11/18/97): $3/4


HOW DID IT FIND TROUBLE?

Molten Metal Technology specializes in managing and recycling hazardous waste. Perhaps it should figure out a way to dispose of the waste that its stock has become. After coming public in 1993, the stock rose to around $40 a share. However, the stock plunged from $28 to $14 in a single day in October 1996 when the company lost Department of Energy funding for a research contract. Doubts were raised about the commercial viability of Molten Metal's waste disposal system.

This spring, when the company's system was passed over for the first phase of waste cleanup at the Hanford radioactive waste site in Washington State, the stock declined further.

This summer and on into the fall the company has been embroiled in a campaign finance controversy. It is alleged that the company gave campaign contributions to Vice President Al Gore in exchange for the aforementioned Department of Energy contracts.

What a mess!

BUSINESS DESCRIPTION

Molten Metal Technology is involved in developing and commercializing technology to manage hazardous waste through catalytic extraction processing (CEP). CEP uses molten metal heated to 3000 degrees Fahrenheit. This metal dissociates hazardous waste into its constituent elements, which dissolve into the metal.

This methodology can be used with hazardous and some radioactive waste. The technology is an alternative to incineration, landfills, and deep well injection.

FINANCIAL FACTS

Income Statement
12-month sales: $23.1 million
12-month income: ($134.2 million)
12-month EPS: ($5.83)
Profit Margin: N/A
Market Cap: $17.7 million

Balance Sheet
Cash: $21.3 million
Current Assets: $43.9 million
Current Liabilities: $44.6 million
Long-term Debt: $206.5 million

Ratios
Price-to-earnings: N/A
Price-to-sales: 0.77

HOW COULD YOU HAVE SEEN IT COMING?

First of all, an investor placing hard-earned dollars into this stock was gambling on the success of an unproven and heretofore undeveloped process. Molten Metal's technology has been highly regarded and there is a lot of hope that it will prove to be commercially successful, but at this point "hope" is the operative word.

A January 1996 Forbes article exposed the relationship between Vice President Gore and the company. The article also pointed out the lack of proof that the company's processes were cost-effective. In a recent Time article, several experts were quoted as being skeptical about the CEP process back in the early 90s.

One way to avoid trouble is to focus on companies with proven products and proven profit potential.

WHERE TO FROM HERE?

The political turmoil surrounding the company continues unabated. A skeptical Fool would have to wonder if this would not ultimately have an impact on the company's ability to conduct business with the federal government, a primary client.

Losses are expected to narrow next year, according to analysts followed by First Call. However, losses remain. The company is also swamped by a mountain of debt, which will ultimately have a dampening effect on earnings.

Although the idea of melting our hazardous waste problems away has a certain appeal, there is also the risk of melting your money away by buying the stock. I would wait for the company show that the CEP system can be run at a profit before investing in these shares.

-Mark Weaver, MD
(MWEAV@aol.com)


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