Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of biofuels maker FutureFuel Corp. (NYSE:FF) dropped 20% today after reporting earnings.
So what: First-quarter revenues were down 11% to $82.2 million, and net income fell 55% to $6.3 million, or $0.14 per share. Analysts were expecting a decline in earnings but thought the company would make $0.17 per share.
Now what: The expiration of the $1 blenders tax credit was a huge hit to the bottom line, and lower volumes in FutureFuel's chemicals division didn't help. Long-term, the challenge is that demand for biofuels isn't increasing because other alternatives are proving to be more economically viable. Shares look cheap at 9.5 times trailing earnings, but I think this is a value trap, and investors should stay out of FutureFuel today.
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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.