Standard Pacific: Bargain or Trap?

Standard Pacific(SPF Quote - Cramer on SPF - Stock Picks) remains a very risky stock for investors.

The ticking time bomb with this stock lies in whether the small-cap homebuilder can start making a profit before its difficult liquidity situation pushes it to the brink of a debt recapitalization or severely dilutive offering of more stock.

Standard Pacific on Monday reported a $216 million loss in the first quarter, amounting to $3.34 a share, much worse than the $1.22 per-share loss analysts expected, according to Thomson Reuters data.

Shares of the company plunged 23% to $2.91 in morning trading Monday, reflecting a price-to book value of roughly 25%.

The quarter included $192 million of land impairment charges. Falling housing prices continue to ravage the homebuilder, as average selling prices for homes closed in the quarter fell 10% from a year ago, including joint ventures.

The declines in prices were severe in Nevada (down 29%), Florida (down 24%) and California (down 19%).

To make matters worse, even adding back the impairment charges and a deferred tax charge, Standard Pacific still reported a loss of $14.8 million.

Bargain-Hunters Beware

With the stock now trading at just 25% of stated book value, it is clearly tempting to bottom-feed with the stock.

The pitiful price-to-book ratio reflects the company's heavy exposure to very poor housing markets such as California, Nevada and Florida, where housing prices are rapidly declining, causing risks to further land writedowns.

But the stock's depressed multiple also reflects the firm's credit quality, especially in a market where equity investors are worried about getting wiped out if homebuilders recapitalize their debt or file for Chapter 11 bankruptcy protection.

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