Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: You wouldn't know it to look at the stock's red ticker now ... but earlier today, shares of homebuilder Standard Pacific (NYS: SPF) were actually up more than 10%.
So what: So why is SP in the red right now? Excellent question. The company reported a $0.03 per share net loss last week. That sounds bad, but on the other hand, SP also mentioned it had inked 764 net new orders for home construction in the second quarter, up 17% sequentially and up 6% against the year-ago quarter. The backlog of work to be done was also up big-time -- 24% year over year.
Now what: So let's see here: Orders are up. Revenues are up. Plenty of work to do, yet it's still losing money. Seems to me investors don't know quite what to make of SP's results -- so let me make it simple for you: We invest in businesses in order to make money.
Standard Pacific isn't doing that. It's unprofitable over the past 12 months. The profits it's expected to earn next year will only be enough to give the stock a 15.5 P/E ratio -- which is more expensive than you want to pay for SP's projected 10% long-term growth.
My advice: Throw Standard Pacific back in the ocean. There are plenty more (and cheaper) fish in the sea.
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At the time thisarticle was published Fool contributorRich Smithdoes not own (or short) shares of Standard Pacific. The Motley Fool has adisclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
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