With 2012 just beginning, now's a great time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.
Today, let's take a look at Star Scientific (NAS: CIGX) . As I discussed last month, Star Scientific put in solid gains in 2011 as the company got out in front of a shift toward cigarette alternatives. But increasingly, tobacco giants Altria (NYS: MO) and Reynolds American (NYS: RAI) have made pushes into the smokeless tobacco realm, threatening to take away any moat that Star Scientific may have started to build. Can the small company make good on its full potential and bring an even bigger payday for shareholders in 2012? Below, I'll take a closer look at what people expect from Star Scientific and its rivals.
Forecasts on Star Scientific
Median Target Stock Price
2011 EPS Estimate
2012 EPS Estimate
Expected Revenue Growth, 2012
Expected Revenue Growth, 2013
Source: S&P Capital IQ. NA = not available; no analysts tracked by S&P Capital IQ set a price target.
What 2012 will look like for Star Scientific?
Investors don't seem to have particularly high hopes for Star Scientific. Analysts expect losses to continue at least through 2014, although revenue estimates peg sales growth at healthy levels. Members of the Motley Fool CAPS community share that pessimism, giving the stock their lowest rating -- just one star out of five.
Fellow Fool Austin Smith has already gone through the bearish case for Star Scientific. With dilutive secondary offerings of shares and ongoing losses and negative free cash flow, early investors could see any eventual rewards watered down from a big rise in the number of shares outstanding.
But bulls point to its newest product, which has gotten off to a good start. Last summer, the company announced that it had launched Anatabloc, a dietary supplement designed to help the body's natural anti-inflammatory system and thereby ward off various auto-immune conditions. During the third quarter, Star Scientific noted that even though Anatabloc was only available for a single month, it nevertheless surpassed sales of its CigRx cigarette-craving supplement, as well as Ariva and its other dissolvable smokeless products. The company has also started a clinical trial in West Virginia to look at Anatabloc's effects, with the study expected to be complete in the fourth quarter.
Moreover, it appears increasingly likely that Star Scientific's patent infringement lawsuit against Reynolds American subsidiary RJ Reynolds Tobacco will go forward. Although an appeals court refused to overturn a 2009 jury verdict finding against Star, it affirmed the validity of Star's patents. As a result, Star expects the case to go back for a trial covering proceedings from periods after the 2002 tobacco curing season.
Even with those patents, tobacco will continue to be competitive, and Star Scientific will keep facing potential threats from Reynolds and Altria domestically. As international regulation starts to have a bigger impact on Philip Morris International (NYS: PM) and British American Tobacco (ASE: BTI) , Star may have new opportunities there as well. But even with some things in its favor, Star will still need to fight hard to keep an edge and repeat 2011's strong stock performance.
If you'd rather just skip the tobacco industry entirely, let us point you to an alternative. In its latest special report, you can learn the name of The Motley Fool's top stock for 2012. The report is 100% free, but don't wait -- read it today before it's gone.
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At the time thisarticle was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Philip Morris International and Altria Group. Motley Fool newsletter services have recommended buying shares of Philip Morris International. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.