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Author: davidausa Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 361  
Subject: Re: Thinking out loud Date: 9/2/2001 6:05 PM
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Hi there, old friend. Nice to run into you.

I couldn't agree with you more about Kemet. The market currently values Kemet at $1.55 billion. During the last couple of quarters of calendar year 2000, Kemet was making what I would consider to be their "typical" quarterly income of just under $100 million. In the first quarter of 2001, earnings dropped to $78 million and, in the second quarter, to $13 million. Based on the "typical" earnings, Kemet's current value equates to a p/e of about 4. But, these "typical" earnings are during a period of time when tantalum supplies were short and the metal was very expensive. Kemet has taken several steps to secure supplies of less expensive tantalum, and increased their capacity, so my rough estimates are that Kemet should be able to make quarterly profits of about $150 million when demand is strong. This, with their current share price, would equate to a p/e of about 2.5.

This, however, isn't the end of the good news. Kemet's cash flow is better even than their earnings. Operating cash flow in the last quarter of calendar year 2000 was $385 million. And, their balance sheet looks terrific, with more than $300 million in the bank, $1.32 billion of total assets, while liabilities are only $425 million, less than $200 million of which is total long-term liabilities.

Kemet is the recognized leader in the manufacture of tantalum capacitors, the gold standard company for the gold standard of capacitors. In an economy of moderate demand for electronic products (like cell phones), I think Kemet is a $40 stock. If electronic products start flying off the shelves like they were 2 years ago, I think Kemet could reach $100 or more.

Best regards, and hope all is going well at your boat dock!

--David
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