SureWest Communications (NASDAQ:SURW)

ScryingPool (< 20) Submitted: 4/12/2011 2:50:11 PM : Start Price: $14.59 SURW Score: -42.12

In addition to the high earnings forecasts for this company, consider the following negatives:1.) DECLINING EPS (61% down forecasted over next 3 years). This signals planned dilution of shares to compensate its outrageous growth in equity, as stated next.2.) VERY HIGH P/E RATIO. This firm has P/E of over 50 and is one of the highest I’ve seen so far this year in a micro-cap (danger=make or bust). This company is getting flooded with equity that it holds to a 62:1 with revenue, therefore…3.) LOW ROI & ROA (both less than 1). However, I don’t know how ROE is greater than 1 given these. Can someone with a good financial/accounting background can explain? 4.) WITHIN 1% OF 52 WEEK HIGH (as I write this).5.) LOW INSIDER HOLDINGS (LESS THAN 20%). Given the hype going around on this stock, I’m not very surprised. Perhaps the owners don’t have much money to invest, perhaps the astounding amount of equity pumped into this company has lowered the Insider to non-insider vested ratio, perhaps the owners don’t think or know that their own firm is going anywhere. All I can say with any manner of absolute certainty is that the last 3 major insider trades over the past 3 months have been SELL (see sec form 4 for SURW). 6.) LOW ASSET-TO-DEBT RATIOS. Current and quicks indicate that this company has some difficulty managing current and long term debt. CONCLUSION: Such a micro-cap firm with a low present return on investment, high P/E ratio, and declining EPS all point to the fact that investors think this company is going to get big pretty soon. Either this firm's revenues will blow up and meet the $250m small cap status very soon or it will devalue just as quickly when investors realize they're carrying something that's not providing returns as fast as they speculated.I predict high volatility for this firm, and where high volatility reigns, I bet on the bear.