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Investing in Poseidon Concepts Corp.? "Adventure" doesn't even begin to describe it – the company's third-quarter earnings disaster sent the shares nearly to the bottom of the ocean.

But, as Maureen McGovern sang in her theme song for The Poseidon Adventure, I think "there's got to be a morning after" for the company's shares.

The Calgary company, a late-2011 spinoff from Open Range Energy Corp., built a better mousetrap: Its tank for fracking fluids required far less assembly effort than what had been on the market. Sales and profits exploded in its brief life as a public company.

However, the earnings report Nov. 15 sent the shares down more than 60 per cent in a day, and further declines have pushed the cumulative drop to nearly 70 per cent.

An overreaction? Well, no, not really. With just six weeks left in the year, the company had to drop its 2012 guidance for EBITDA (earnings before interest, taxes, depreciation and amortization) from over $200-million to a range between $140-million and $150-million. Analysts expected revenue of more than $70-million for the quarter; Poseidon posted just over $40-million instead. Earnings per share, expected to push 50 cents, came in at a dime.

The company took a $9.5-million charge for uncollectable revenue, and its accounts receivable – sales already made and booked as revenue, but not yet collected – increased.

Poseidon cut prices in the quarter to maintain sales, renegotiated long-term deals with other customers, and just plain lost others as "several other long-term agreements lapsed without renewal or were suspended," according to the company.

It really could be the worst quarterly earnings announcement in all of Canada for 2012. (I welcome your nominations for other contenders.) In one dismal day, Poseidon went from the sparkly growth story of the energy services sector, with 500 per cent year-over-year profit growth, to a company with declining earnings.

And, I should add, a few days later, Poseidon came out dead last of 200-plus companies in The Globe and Mail's recent Board Games rankings of corporate governance. So why in the world should you even consider investing in this turkey? You should, if you're an investor with a corner of your portfolio devoted to speculative stocks.

The freefall in Poseidon's share price means the company's 9 cents-per-month dividend ($1.08 annually) now produces an absurd 27 per cent yield.

How likely is that to continue? More likely than you may think. But most of the shell-shocked equity analysts who follow Poseidon have rerun their numbers with the company's new reality and believe 9 cents a month is sustainable, albeit with a high payout ratio for 2013 cash flow. (The company has cut its capital expenditure budget and is instituting a dividend-reinvestment plan that allows the payout to be made in shares, not cash – two signs Poseidon will make a go of keeping payments up.)

Skeptical? Okay. Michael Mazar of BMO Nesbitt Burns Inc. believes, by contrast, the dividend must be cut to 4 cents per share per month "in order to have some semblance of sustainability." At current share prices, that's still a 12-per-cent yield.

Mr. Mazar looked at Poseidon's price of $5.28 in late November and said he could not recommend the shares at those levels. He has an "underperform" rating and has now assigned an earnings multiple to Poseidon that's below the average for his energy services group. And yet that methodology still results in a target price of $5, which is now 25 per cent above Poseidon's current levels.

Other analysts cut their target prices by more than 50 per cent, then saw Poseidon's shares drop even further. FirstEnergy Capital Corp. analyst Kevin Lo, for example, cut his target price from $20 to $8.50, which even now represents a more than 100-per-cent gain on the current share price.

Poseidon's third quarter, as disappointing as it was, still produced gross margins pushing 80 per cent and a return on capital exceeding 20 per cent. The company is rolling out new fluid-handling products to expand beyond its core frack-tank offering. The company's balance sheet is healthy, and Mr. Lo notes it could pay off all its debt by doing a better job of collecting its receivables.

The dividend yield, plus such encouraging numbers make me return to the lyrics of Ms. McGovern's song: "There's got to be a morning after/If we can hold on through the night/We have a chance to find the sunshine/Let's keep on looking for the light."

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