Coal -- it's not just for breakfast anymore, but by breakfast time tomorrow, you'll be able to read the Q2 2008 earnings report for coal mining equipment maker Joy Global (NASDAQ:JOYG). Crunchy.
We'll have time aplenty to dissect the specific numbers after the news comes out. But before we begin obsessing over Joy Global's short-term progress, let's use these last few hours to review what investors think about it as a long-term investment. Our tool in this endeavor: Motley Fool CAPS, where we poll more than 105,000 investors for their views on more than 5,600 companies, Joy Global among them. Here's what Fools have to say about the company and its long-term prospects.
Up or down?
Nearly 1,000 investors have submitted ratings on Joy Global. Their verdict: Happy, happy, joy, joy!
Of the CAPS players polled, 97% expect Joy Global to outperform the market, good enough to earn this company a full plate of five stars on CAPS. Then again, optimism runs rampant among heavy-equipment manufacturers:
|
Construction Machinery Group | |
|---|---|
|
Joy Global |
***** |
|
Bucyrus International (NASDAQ:BUCY) |
***** |
|
Manitowoc (NYSE:MTW) |
***** |
|
Columbus McKinnon (NASDAQ:CMCO) |
***** |
|
Valmont Industries (NYSE:VMI) |
***** |
|
Deere (NYSE:DE) |
**** |
|
Caterpillar (NYSE:CAT) |
**** |
Wall Street vs. Main Street
Wall Street's right there with Main Street on this one. All of the five analysts who've taken affirmative buy/sell positions on Joy Global are running with the bulls on this one. (Little wonder. The company's stock has crushed the market this past year, outperforming the S&P 500 by a good 57 points.)
Bull pitch
CAPS All-Star mathieugp penned the top-rated pro-Joy Global pitch back in March, and it went a little something like this:
This is surely a good company if you want to profit from the increase of production of copper and oil sands, two very profitable commodities to extract right now. Companies that extract those two commodities will need more equipment because they will want to get their resources on the market ASAP to profit [from] high prices, they will also need services for reparation and annual check-up on that equipment... Joy Global offers these services, they will enjoy increased production in the mining industry and this is [an] industry that will increase by great amount the actual production.
Yep. You read that right. In addition to making coal mining equipment, Joy Global also has a hand in digging up oil-soaked sand and other mineral deposits lying near the surface. And in addition to coal, it makes gear for delving into the earth in search of copper, iron ore, silver, gold, and diamonds. Basically, if you have to dig even a little bit for it, Joy Global can help.
Bear pitch
So what's the downside, you're asking? Well, there are a couple. Generally speaking, bears are an endangered species on this stock, but five people have chimed in with underperform pitches, including All-Star dwot, who raises the point that "Commodities [are] in oversupply." (Then again, dwot said this six months ago, and the prices of raw materials just keep going up.)
Since no one else is saying it, let me take the valuation argument here: Joy Global may be going great guns, and for as long as that lasts, great -- but it's also priced for perfection. The stock sells for 19 times trailing free cash flow and an even scarier 29 times trailing earnings. Yet analysts expect to see only 14% growth out of the company. Call me a Fool if you like, but that seems objectively expensive.
Who said that?
To learn more about the wise Fools who penned these words, examine their records (and see whether they know whereof they speak), and to explore the plethora of additional financial data we've put together on the company, just click here.
