I did see a story about delaying the startup of the third ethanol production facility this month because of "market conditions".  I don't like the sound of that story...hmmm.  By the way, VSE closed today (6/25/08) at $4.11, up $.13 or 3.27% on the day. Generally, I have been avoiding low-priced stocks under $10/share, but that is another story.

But let's keep looking for those earnings.

On May 12, 2008, VeraSun (VSE) reported 1st quarter 2008 results.  Revenues literally exploding climbing 257% to $516.5 million.  Net income turned positive at $7.6 million or $.08/diluted share vs. a  loss of $(.3) million during the same quarter last year.

Well that report looks pretty nice!

However, you probably know that I believe that earnings expectations are often critical in determining whether a financial result is actually good or bad news!  In other words, if we look through the news, we can get another report from the A.P. that indicates that the company missed expectations on earnings ("Analysts polled by Thomson Financial expected, on average, earnings per share of 16 cents.").  Within the same article, the reporter notes tha the company did beat expectations of $500 million in revenue when they reported the $516 million result. 

So the earnings news were at best 'mixed' although on the surface they appear pretty spectacular.

My next step (which you may or may not wish to emulate) is to examine whether the longer-term results are just as positive.  For this, I utilize Morningstar.com, another free website--Morningstar also has a subscription-based premium site that does cost money.  (In this case, I do own some shares of Morningsar (MORN) in my trading account--full disclosure).

If you enter VSE into the "quotes" box near the upper left, and then click on "Financial Statements" on the left side,  and finally click on the "5-Yr Restated" tab you will get here.

Let me give you my take on this company.  First revenue growth is beautiful with steady increase from $13 million in 2003 to $848 million in 2007 and $1.2 billion in the trailing twelve months (TTM).  Earnings, however, have been at best erratic,  jumping from $.02/share in 2003 to $.39/share in 2004, before slipping back to $.01 in 2005.  Earnings then climbed to $1.03/share in 2006, and diped back to $.31/share in 2007 and increased to $.39/share in the TTM.  Not exactly steady and consistent growth.

Something else, a word about 'free cash flow'.  This might or might not be important to you.  It means a lot to me.  I am looking for companies from a relatively conservative viewpoint.  That is, I want to own shares in companies that from my most amateur viewpoint appear to be financially healthy.  And that requires them to be producing free cash instead of consuming it.

In VSE's case, the company was negative $(90) million of free cash flow in 2005, improved it to $54 million in 2006, dipped to a low of $(399) million in 2007 and has deteriorated further to a negative $(468) million in free cash flow in the TTM.

Not exactly the numbers I would prefer to see.

That doesn't mean that this might not be a terrific investment.  Seriously.  A great investment is a stock that when you have gone long, that is purchased shares for possible price appreciation, actually does go up in price.  So these financial things are the stuff I look for in a stock.  That doesn't mean that you need to...just my thing I guess.

Returning to Morningstar, we can see that the company has $73 million in cash and $323 million in other current assets.  Considering the company has $189.3 million in current liabilites, this is a current ratio of over 2:1.  Which would appear on first glance to be quite healthy.  But when we take into consideration the nearly 500 million in cash flow 'destruction', we can see that the balance sheet could possibly be in the process of deteriorating somewhat.  At least that's my take.

I usually go next to Yahoo "Key Statistics" to get some more information on the stock.