Barrons Talks About Correction Companies (GEO, CXW & CRN) In This Weekend's Paper
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Barron's believes there's money to be made in companies that house criminals--correction facilities.
Barron's specifically thinks there's money to be made in shares of prison companies like GEO Group (NYSE: GEO), Corrections Corp. of America (NYSE: CXW) and Cornell (NYSE: CRN).
Barron's believes Pew, who forecasts prison population, will grow by 192,000, to close to two million by 2011. The Pew report estimates that the growth in the prison population will produce a five-year cost to taxpayers of $27.5 billion.
The three companies do trade at lofty price-to-earnings ratios, but because of the prison population growth, they seem reasonable.
Corrections Corp. (NYSE: CXW), for example, at its recent price around $25, was trading at about 24 times its estimated earnings for this year of $1.04 a share, well above the 20.5 of the S&P 500. The company's earnings are growing around 20% annually and if the shares keep their current P/E, the price could jump to $30.
GEO (NYSE: GEO), which was hurt Friday by the announcement that it is losing a contract in Texas, trades at 26 times estimated earnings for this year. But its CEO sees no impact on this year's earnings from the Texas decision.
Cornell (NYSE: CRN), whose earnings estimates were cut this year after it lost a federal contract for the incarceration of illegal immigrants at one of it's Arizona prisons, may appear expensive at first glance, trading at 30.5 times 2007 earnings estimates. But analysts believe earnings will rebound next year to $1.27 a share from an estimated 82 cents this year, sending the stock up by 40% or more.
Barron's specifically thinks there's money to be made in shares of prison companies like GEO Group (NYSE: GEO), Corrections Corp. of America (NYSE: CXW) and Cornell (NYSE: CRN).
Barron's believes Pew, who forecasts prison population, will grow by 192,000, to close to two million by 2011. The Pew report estimates that the growth in the prison population will produce a five-year cost to taxpayers of $27.5 billion.
The three companies do trade at lofty price-to-earnings ratios, but because of the prison population growth, they seem reasonable.
Corrections Corp. (NYSE: CXW), for example, at its recent price around $25, was trading at about 24 times its estimated earnings for this year of $1.04 a share, well above the 20.5 of the S&P 500. The company's earnings are growing around 20% annually and if the shares keep their current P/E, the price could jump to $30.
GEO (NYSE: GEO), which was hurt Friday by the announcement that it is losing a contract in Texas, trades at 26 times estimated earnings for this year. But its CEO sees no impact on this year's earnings from the Texas decision.
Cornell (NYSE: CRN), whose earnings estimates were cut this year after it lost a federal contract for the incarceration of illegal immigrants at one of it's Arizona prisons, may appear expensive at first glance, trading at 30.5 times 2007 earnings estimates. But analysts believe earnings will rebound next year to $1.27 a share from an estimated 82 cents this year, sending the stock up by 40% or more.
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