Trading at $16, shares of Alon USA Energy (ALJ) are deeply undervalued. Based on a discounted cash flow analysis, ALJ should be trading at $27/share. The key assumptions are Reuters analyst mean revenue estimates for 2007 and 2008, 3% annual revenue growth thereafter, EBIT/Sales 5% and WACC of 7.9% (assuming a constant capital structure).
ALJ is independent refiner and marketer of petroleum products operating primarily in the South Central, Southwestern and Western regions of the United States. ALJ operates four sour and heavy crude oil refinaries. ALJ operating segments (i) refining and marketing, (ii) asphalt and (iii) retail.
The continuing world demand for refined oil product and tight refining capacity in USA are positive growth factors for ALJ. Risks are general economic conditions, demand for products crude oil prices and competition.
I hold ALJ in my personal account and in my model portfolio
http://www.marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/...
$16.37 (02/22/08)
