Mercer International - Aggressive Growth

Mercer International (MERC) is seeing a sharp turnaround in its earnings trends, leaving shares with not just a great growth story but trading at a value as well.

This Zacks #1 Rank (Strong Buy) has slid lately, along with most other stocks, but is a great “buy on the dip” candidate.

Company Description

Mercer is a global pulp maker. With its 3 mills the company serves customers in North America, Asia and Europe.

Well Ahead of Expectations

On Feb 14 Mercer posted its fourth-quarter results that showed net income increase 12 times, to $48.0 million since the same period last year. Earnings broke down to $0.73 per share, which was 18 cents higher than analysts expected.

The company hit record levels for its annual pulp production and several other operating metrics. Comments from the CEO painted a positive picture for the coming year.

Analysts Loved it

Right after the news, analysts polled by Zacks drastically increase forecasts for 2011 and 2012. This year’s consensus jumped from $0.71 cents 3 months ago, to $1.96. Next year’s average estimate moved from $1.13 to $3.18.

If estimates remain unchanged, this would mean a 13% decrease in earnings this year but a 63% jump in 2012. While a negative growth rate is not what many people want to see in an “aggressive growth” stock, the key here is the huge move in estimates.

Great Value

Shares of MERC are trading at roughly 6 times this year’s earnings estimates, well under the industry average. The price to sales is only 0.45 times, also under the norm for its peer group.

The Chart

It is pretty easy to get lost in the short-term ups and downs of the market and shares of MERC have sold off recently along with most other stocks.

But if you take a step back and look at just how good the earnings trend is, you might be compelled to buy in on this dip. Take a look below, those estimates have been rising at fantastic rates and show no signs of slowing.

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