RAIL

**vik589** Thu Apr 19, 2007 6:55 pm

RAIL
Blast,
Have you looked at this stock.....looks quite cheap based on the valuation ratios. Any input on this one?? thanks

**blast_investor** Thu Apr 19, 2007 7:58 pm

Re: RAIL
Hi vik589:

Yes, I studied this months back. The PE and current earning apprears to be cheap on this stock RAIL.

However, the sale and business is expected to decline pretty sharply from here. There is lots of uncertainty from here. It is usually very dangerous to invest into a low PE stock at peak earning. RAIL is in such industry.

This stock for me is uncertainty from here in a basically unstable business environment. Merely based on current earning (which is peak earning) is not enough justification to invest here. My take: I would do more research and get more sense of certainty before any dollar commitment.

vik589 wrote: Blast,
Have you looked at this stock.....looks quite cheap based on the valuation ratios. Any input on this one?? thanks

**vik589** Thu Apr 19, 2007 8:55 pm

Thanks for the quick reply...yes i was going to go to the library tomm and try to find 10-15 years of earnings data on this sotck and then calculate average earning so see what the actual P/E is based on average earnings.

So I guess for cyclical stocks cheapness based on P/E concept is sort of reversed is'nt it?? i.e that a low P/E stock may just point to a cyclical bussiness at its peak (therefore an expensive stock) and a high P/E may indicate a cyclical bussiness at its bottom.

Besides the P/E based on average earnings what other ratios should be looked at to study cyclical stocks??

**blast_investor** Thu Apr 19, 2007 11:28 pm

There aren't any quick method. Most of value approach takes hours to study one stock at minimum. Buy high PE at bottom and sell low PE at top was Lynch's rule on cyclicals. I tend not to use the lynch rule too literally because it is difficult to apply. Average earning over 10 to 20 years would be my take of research. Yeah, I agree with you on that.

RAIL this stock had quite big insider sellings recently. I have found insiders in generals are remarkably sharp value investors, and this can be quick indicator for value.

But of course, sometimes insider sign is not any indication of value. It may help you make quick decision though. I was not impressed when I saw the large selling from RAIL insiders months ago.

I generally do not want to hold bag when insiders are dumping millions $ of shares at same time, which RAIL insiders are doing that right now.

vik589 wrote: Thanks for the quick reply...yes i was going to go to the library tomm and try to find 10-15 years of earnings data on this sotck and then calculate average earning so see what the actual P/E is based on average earnings.

So I guess for cyclical stocks cheapness based on P/E concept is sort of reversed is'nt it?? i.e that a low P/E stock may just point to a cyclical bussiness at its peak (therefore an expensive stock) and a high P/E may indicate a cyclical bussiness at its bottom.

Besides the P/E based on average earnings what other ratios should be looked at to study cyclical stocks??

**Mosguy** Sun Apr 22, 2007 10:13 pm

I would be very careful with RAIL. The low P/E is misleading. RAIL had a huge backlog in railcar deliveries from 2005. They just so happen to book the sales in 2006 increasing eps but haven't seen the strong demand since. To me this means, that unless demand for the railcars pickups big time, short term earnings should suffer. I would wait until then, when the earnings temporarlily fall (and hopefully the stock price)...then we might be looking at long-term value.

Just my thoughts.

P.S. The stock options awards look way out of hand to me at first glance by the way...and execs are dumping stock. I believe they see the trend and are selling out to an overly optimistic Mr. Market.