posted
They're talking about PLNI on The Motley Fool now...!!!
An Exciting Penny Stock By Selena Maranjian (TMF Selena) November 4, 2005
A month or so ago, I wrote an article on penny stocks, advising readers, as I've often done, to consider steering clear. I received a thoughtful response from a reader and thought I'd share it with you. Jeffrey T. said:
"I found your Motley Fool article on penny stocks nearly right on the money ... however, not ALL penny stocks are scams. Take Plasticon International (OTCBB: PLNI), for example. They are a fledgling company utilizing recycled plastic to manufacture concrete building products such as rebar supports and, coming soon, plastic rebar. With the future rebuilding efforts after Hurricanes Rita and Katrina, alternatives to steel products will be sought. Add to this, the company has recently acquired a company specializing in concrete sealing. This product along with the rebar supports can easily add YEARS to the life of bridges and buildings, by reducing the amount of decay from environmental impacts and corrosion. I would like to see you do a follow up story to the one you recently wrote, and highlight that there do exist some DIAMONDS in the pile of shiny rocks as you so appropriately quoted!"
Jeff, your wish is my command. There surely are some diamonds in the pile of penny stocks -- I'll concede that point immediately. The problem is, they're not so easy to find, and I'm not even sure that you've found one in Plasticon.
Plasticon's green flags Your email did make Plasticon sound quite enticing, so I tried to look up information on it. I struck out at my usual sources of quick data, such as our own Quotes and Data area and even Yahoo!'s offerings. The place where I found the most information was Plasticon's website. There, I learned that:
The firm is 17 years old.
Its "line of patented, plastic concrete accessories has been approved or accepted in all 50 states and several foreign countries including Poland, Israel, Canada, Mexico, and Egypt. In addition, its transportation signage has received DOT approval or acceptance in all 50 states."
It has recently dramatically increased production capacity to $20 million in annual sales -- and up to $30 million, soon.
The market for rebar supports was $27 billion back in 1993, suggesting that there's plenty of money to be made if Plasticon's plastic rebar is accepted and purchased.
Plastic lumber sales in the United States are growing at 40% per year. I've seen plenty of plastic lumber and am impressed with it. Tom Gardner even recommended plastic lumber maker Trex (NYSE: TWP) in our Stock Advisor newsletter. (Though its stock has been having a bad year.)
A link to a profile of the company in a newspaper reported that the firm's products are used in all 50 states, and in more than 200 bridges across the nation, as well as elsewhere. Also, the firm has received patents valued at over $20 million and has an inventory of injection molds valued at over $10 million. (Inventory, like patents, isn't necessarily a good thing, unless it's put to good use.)
The firm is planning to buy back shares -- some 200 million to begin with -- which can boost the share price. Plasticon's red flags The only trouble is, despite all this information, I didn't see some of the info I was seeking. Specifically, I couldn't find:
Copies of quarterly and annual financial reports filed with the Securities and Exchange Commission (SEC).
Reports on just how much money the company has taken in in revenues over the past years and quarters, and how much it has kept as profits. (One press release listed on the company website had a headline that said "Plasticon Announces Company is Profitable as of Second Quarter 2005," but the link to the article was no longer working.)
Reports on the company's financial health. For example, how much debt does it have, and how much cash? Sometimes terrific companies crash because they can't service their debt or just don't have enough money to keep the machinery running long enough to make money. This is pretty standard stuff for most publicly traded companies. For example, a quick trip to the website of Buffalo Wild Wings (Nasdaq: BWLD), a $225 million company recommended in our Hidden Gems newsletter a few months ago, offers links to annual reports and SEC filings, among other things. (Grab a painless free trial of Hidden Gems and see what other small, dynamic firms we've recommended.) It's the same with $650 million Rule Breakers recommendation Myriad Genetics (Nasdaq: MYGN), which is up some 14% since being featured a few months ago. (Try Rule Breakers for free and see the whole list of recommended stocks.)
There's other information I'd want before I'd consider investing in this firm, too. For example, who are its competitors and how are they doing?
Above all, I'm left wondering why the company, if it's doing so well, isn't offering any data on its financial health and performance for investors and would-be investors. One might argue that such details might be hidden so as not to inform competitors, but still ....
I tried one last resort. I called the Investor Relations contact person listed on the website. I thought I'd gotten the wrong number at first, though, because the call was answered by a Florida-based consulting company, which apparently handles investor relations issues for the Kentucky-based Plasticon. Regardless, I asked the fellow to send me the company's latest financial statements -- and was told he couldn't. He said they would be available in the near future, and that he'd send them to me. This was a week or two ago, and all I received was a press release announcing that "Plasticon Transfers Wholly Owned Inventory of Injection Molds to New Production Facility" and "Injection Molds Have Been Independently Valued at $10 Million." I even asked for past reports, while I wait for the latest ones. That went nowhere, too -- they simply weren't available.
In a nutshell I've seen, read and heard enough about Plasticon now to make me not want to invest in it. This could end up being one of many investments and non-investments I regret later, but that's OK.
The company's market cap, or total market value, appears to be in the neighborhood of $15 million. That's pretty darn tiny. A simple, successful mom-and-pop store down the street might carry such a value. The stock price is a mere penny per share. If the firm is really doing so well, why are the stock price and market value so low?
I remain committed to my belief that most stocks valued at less than $5 per share carry such low prices for good reasons. These "penny stocks" tend to be volatile and are easy to manipulate and lose money on. Basically, I'd rather invest in firms with established and impressive track records and more transparent finances. If Plasticon one day offers more data on itself, I'll be happy to take a closer look, since the company and the industry are quite intriguing.
In the meantime, there are lots (and lots) of more established and exciting companies. Even Tootsie Roll (NYSE: TR) is compelling -- as W. D. Crotty explained recently. He pointed out that had you invested $1,000 in Tootsie Roll back in 1957, you'd have more than a million dollars now, as its average compound growth rate over the period topped 16%. Then there's Avon (NYSE: AVP), which as M. D. Mitchell explained, is growing slowly but surely and may grow much more, thanks to a presence in China. And Stock Advisor selection 7-Eleven (NYSE: SE), which recently reported sales up 17% and profits up a whopping 54%. See? Lots of promising candidates for investments -- and they all have financial statements ready for your examination.
So am I here to slam Plasticon? Not at all. I just don't know enough about it, even though I tried to learn -- which is the problem. If you know more than I do about Plasticon, as you well might, I invite you to share more information on our discussion board.
"....The only trouble is, despite all this information, I didn't see some of the info I was seeking. Specifically, I couldn't find:
Copies of quarterly and annual financial reports filed with the Securities and Exchange Commission (SEC).
Reports on just how much money the company has taken in in revenues over the past years and quarters, and how much it has kept as profits. (One press release listed on the company website had a headline that said "Plasticon Announces Company is Profitable as of Second Quarter 2005," but the link to the article was no longer working.)
Reports on the company's financial health. For example, how much debt does it have, and how much cash? Sometimes terrific companies crash because they can't service their debt or just don't have enough money to keep the machinery running long enough to make money. This is pretty standard stuff for most publicly traded companies. For example, a quick trip to the website of Buffalo Wild Wings (Nasdaq: BWLD), a $225 million company recommended in our Hidden Gems newsletter a few months ago, offers links to annual reports and SEC filings, among other things. (Grab a painless free trial of Hidden Gems and see what other small, dynamic firms we've recommended.) It's the same with $650 million Rule Breakers recommendation Myriad Genetics (Nasdaq: MYGN), which is up some 14% since being featured a few months ago. (Try Rule Breakers for free and see the whole list of recommended stocks.)
There's other information I'd want before I'd consider investing in this firm, too. For example, who are its competitors and how are they doing?
Above all, I'm left wondering why the company, if it's doing so well, isn't offering any data on its financial health and performance for investors and would-be investors. One might argue that such details might be hidden so as not to inform competitors, but still ....
I tried one last resort. I called the Investor Relations contact person listed on the website. I thought I'd gotten the wrong number at first, though, because the call was answered by a Florida-based consulting company, which apparently handles investor relations issues for the Kentucky-based Plasticon. Regardless, I asked the fellow to send me the company's latest financial statements -- and was told he couldn't. He said they would be available in the near future, and that he'd send them to me. This was a week or two ago, and all I received was a press release announcing that "Plasticon Transfers Wholly Owned Inventory of Injection Molds to New Production Facility" and "Injection Molds Have Been Independently Valued at $10 Million." I even asked for past reports, while I wait for the latest ones. That went nowhere, too -- they simply weren't available...."
Be very careful with plni - you never know where the bottom is.
UBBFriend: Email this page to someone!
Printer-friendly view of this topic
