Do you remember your first Valentine's Day infatuation? Mine was Patti (her real name). It was third grade, and life was good.
My infatuation made me foolish and deprived me of sound judgment. Back in third grade, having those qualities was all part of catching Patti's gaze. But to be a true Fool, you have to have good judgment, as The Motley Fool's name is derived from the court jester who, in Elizabethan drama, was able to tell the King the truth without having his head cut off.
So, let this Foolish writer share a little Valentine's Day news story about a jury decision and how it may or may not make life good for Headwaters (NASDAQ:HDWR).
Last November, I was opining about the large debt at Headwaters, a fast-growing company with offerings in the energy, construction, and home improvement industries. The company's ability to turn coal trash into cash, as a replacement for cement, amused me at that time.
Not on my radar was a court case in which Headwaters was seeking royalty payments for alternative fuels. Today, the company announced that a jury said that insurer Arthur J. Gallagher (NYSE:AJG) owes it $175,294,532 for breach of contract related to a joint venture. Talk about a Valentine's Day present.
But do me a favor. If you see Headwaters shareholders celebrating, tell them today's windfall may never be collected.
Today's present comes with lots of qualifiers. Appeals will likely follow. The judge has to agree to or modify the jury's proposed award. In plain English, it's too early to head for the King's table to celebrate. But there's positive ambiguity in the mix as well: The court has yet to rule on Arthur J. Gallagher's future obligations under the contract.
Investors liked the news and sent the stock up 3.5% in early trading, although that gain shrank as hours ticked away. Headwaters, trading at 17 times trailing earnings, wouldn't seem to reflect the promise a large favorable court settlement would bring -- even if it is years away.
Investors interested in this company with a nanotechnology twist should review this Foolish analysis and the latest earnings report. The stock has soared 37% over the last 52 weeks -- a solid Valentine's Day-to-Valentine's Day return.
With the company's robust $133 million in trailing annual free cash flow (so sweet, given comparable revenue of $671 million), and strong double-digit percentage gains in earnings projected by analysts (equally sweet), the stock should continue to outperform the overall market.
Fool contributor W.D. Crotty loves profits -- even when they come from trash. Speaking of trash, W.D.'s stocks do not include any of the quality names mentioned in this Take. Click here to see The Motley Fool's disclosure policy .
