You saw the headlines. You know your stock price made a big move. But what does that portend for your investment's future?
By pairing the latest news with the collective wisdom of our 180,000-strong Motley Fool CAPS investing community, we might be able to discover whether your stock's latest exploits are a short-term hiccup -- or the start of a much bigger trend.
These two stocks both made big moves over the past five trading days, one up, one down:
CAPS Rating (out of 5)
Change Past Week
|Central European Distribution (Nasdaq: CEDC )
|Alimera Sciences (Nasdaq: ALIM )
Source: Motley Fool CAPS, % Chg. from Feb. 24 to Mar. 2.
72 inches down
Although it's best-known for vodka, Central European Distribution wants to slam back some whiskey business, particularly in Poland, and recently signed a distribution agreement with Beam (Nasdaq: BEAM ) to add Jim Beam bourbon, Maker's Mark whiskey, and Sauza tequila to its roster of liquors. With the Polish whiskey market tripling in size over the past five years, CED believes this represents a chance to make up at least some of the ground it's been losing to Diageo and others.
Russian Spirits distributor Russian Standard has been looking at CED through the bottom of a bottle, regularly increasing its stake so that it now owns a third of CED's outstanding shares. Although that's gone a long way towards reviving CED's sagging stock, CAPS member ETFsRule is concerned the vodka distributor's finances aren't as sound as they might otherwise appear.
CEDC's stockholder equity is $700 million, but they have over $1 billion in "goodwill" on their balance sheet. That's a little too optimistic for me.
After it filed its latest annual report, CED notes goodwill now totals $1.1 billion and accounts for more than 55% of its total assets. In his seminal book, It's Earnings That Count, author Hewitt Heiserman says anything over 20% is a cause for concern because “management might be overpaying for the acquisition or acquisitions that gave rise to the goodwill."
Indeed, CED says it's incurred impairment charges related to its goodwill for the last two years, taking charges totaling $930 million for 2011, which led its auditor to issue a going-concern notice. That means there's serious doubt about its ability to survive.
Tell us on the Central European Distribution CAPS page or in the comments section below if you think there are other areas to keep a gimlet eye on, and add the liquor distributor to your Watchlist to be alerted if it becomes lost in the bottle of additional goodwill charges.
Got my eye on you
Biotech investors often look to Europe for solace when their companies run up against the brick wall of FDA denial.
Cerus (Nasdaq: CERS ) inked a deal last month with France's national blood service for its Intercept transfusion safety system – one that's used all over Europe -- though the FDA has thwarted attempts thus far to get it approved here. Cell Therapeutics (Nasdaq: CTIC ) has found a receptive audience overseas, though an FDA advisory panel voted unanimously against approval of pixantrone. And although Chelsea Therapeutics neurogenic orthostatic hypotension drug Northera survived a narrow 7-4 vote in its favor, negative briefing documents have some investors skeptical of FDA approval despite the drug's use outside the U.S.'s borders.
So with Alimera Sciences running into the FDA's buzzsaw twice with the white-jacket types here at home, investors were hopeful it would fare better in Europe with its eye drug Iluvien. And fare better it did, receiving approval to treat diabetic macular edema in seven major European countries. Moreover, this gives Alimera the opportunity to either partner the drug with a big pharmaceutical company or become a takeout target to one of them. There are a lot more options open to it now than before.
Alimera is still flying under the radar of Wall Street and Main Street, but 91% of the CAPS members rating the biotech believe it will outperform the broad indexes even if its low two-star rating suggests they think there are better places for your money.
See your way to the Alimera Sciences CAPS page and let us know if this stock still has stars in its eyes, then add it to the Fool's free portfolio tracker and watch for the FDA to come to its senses. Or not.
Read all about it!
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