The growth in selling, general and administrative expenses can place some downward pressure on earnings growth. This growth is driven by the incremental costs such as contract labor and occupancy cost associated with the expansion or opening of new distribution centers. In addition, the company's growth is not without risk from competition. Its competitors could obtain exclusive rights to distribute certain products, eliminating MWI's ability to distribute those products.

MWI will need to complete more acquisitions to maintain its strong growth outlook. At its current price of $37.05 per share, MWIV is trading at roughly 20x fiscal 2009 EPS estimate of $1.88, which is at a premium to the group average multiple of roughly 18x. We believe the stock should continue to trade at a premium to the 1.1x group average P/E/G. Our price target remains at $42, or roughly 22x 2009 EPS.

Good Value for CastlePoint

CastlePoint Holdings, Ltd. (CPHL) results were $0.29 per share, six cents below our expectation. The company continues to experience an increase in revenue as a result of higher net premiums and strong product demand. As a result of its strategic relationship with Tower Group, Inc. (TWGP), CPHL has access to lucrative U.S. markets, without having had to incur significant costs associated with establishing a primary insurance company infrastructure. Thus, we maintain our Buy rating for the shares.

As a result of the first-quarter results and company guidance, we have maintained our FY08E and FY09E earnings expectations at $1.80 per share and $2.10 per share, respectively. We would expect current profitability and operation efficiency measures to be sustainable, if not exhibiting some improvement over the coming quarters, as the company continues to expand into the U.S. In addition, we would anticipate the tax rate to increase to 7-9% range.

At the current level, the shares of CastlePoint trade at 0.92x the 1Q08 book value of $10.96 per share. We envision the price-to-book value multiple 1.07x (the second lowest peer price-to-book value) over the next six-months. We are adjusting our six-month price target to $12.65 per share, up from $12.40 per share, based on our estimated book value of $11.85 per share by the end of 3Q08.

Energy Conversion Now Profitable

We remain optimistic about Energy Conversion Devices, Inc.'s (ENER) long-term potential success in the high-growth alternative energy industry. The company also achieved profitability for the first time in the reported quarter since it went public in 1969. Nevertheless, we note the stock's high volatility, pending sale of its Cobasys joint venture, and higher preproduction costs.

A history of negative profit margins, operating income and negative historical earnings, including EPS losses until Q2 08, without meaningful valuation metrics, collectively show potential for moderate-to-high returns yet with high risk. Accordingly, we maintain a speculative Buy recommendation on ENER common stock.

The investment outlook for the alternative energy industry is bullish, in our view, with significant growth potential over the next 5-10 years. The consolidated revenue is expected to be between $73 and $78 million for the fourth quarter ending June 30 and between $246 and $251 million for fiscal 2008. For the fourth quarter, ENER expects to maintain the 30% to 31% gross margin it achieved in the reported third quarter.

The ENER stock is expected to trade at high growth-oriented price-earnings multiples throughout its current fiscal year 2008 and much lower and attractive P/E multiples in the low-to-mid double-digit range, if high EPS growth materializes as expected in 2009. Accordingly, we maintain a speculative Buy recommendation on ENER common stock with a six-month target price of $74.00, representing 13.2% near-term upside potential.