The advice to Benjamin Braddock in the 1967 comedy-drama film The Graduate needs an update: the future is “bio-plastics.” At least that’s what Metabolix (Nasdaq: MBLX) thinks. The company has just received approval from the U.S. Food and Drug Administration (FDA) for its biodegradable plastics that can be used in lieu of traditional petroleum-based plastics. That was good for a +17% pop in the stock this morning.

Which leads to this question: how do you a value a stock with little revenues and $35 million in annual expenses? For an answer, you’ll need to make some assumptions. First, what percentage of the multi-billion market can the company conquer? Second, how much can the company produce? And lastly, what do profit margins look like?

#-ad_banner-#Market share could prove to be impressive, thanks to the company’s partnership with Archer Daniels Midland (NYSE: ADM). (Those two firms have created a joint venture called Telles that will produce the material known as Mirel). It helps that ADM can supply an unlimited amount of corn, which will be needed to make the bio-plastics. Metabolix is also working with sugar and tobacco for alternative forms of enzyme-created bio-plastics. The company hopes to eventually move into other products such as spandex, polyurethanes and industrial resins. The short answer: it’s impossible to glean potential revenue growth at this point.

Metabolix has the ability to eventually produce 440 million pounds of bio-plastics each year at its facility in Iowa. In the near-term, output will be limited to 110 million pounds a year. But the company may still struggle to produce the bio-plastics cheaply enough to compete with traditional plastics. And as history has shown, businesses and consumers only hop on the green bandwagon when they aren’t asked to pay too high a price.

This is no upstart; Metabolix has been around for 20 years, and holds more than 500 patents. But the payoff is still a ways away: ADM pumped $300 million into the project and will need to recoup that investment before royalties are split. Yet down the road, if and when royalties roll in, this could be a very high-margin business model.

Add it all up, though, and there are a lot of unknowns here. The FDA approval certainly justifies today’s stock move, and the company’s market capitalization of around $400 million implies ample room for a higher valuation if the company can generate real earnings power. But many promising upstarts in this field have failed to deliver on their promise in the past, so you may want to wait for a pullback before dipping into this story stock.

———————————–

Nearly two weeks ago, turnaround. We thought a turn would come — eventually. We advised that “there’s no need to buy shares just yet. That’s because analysts had been too aggressive in their profit forecasts, and will likely need to ratchet them down – that could pressure shares further in coming sessions.” How true. Shares fell another 20% since then. But they are up a robust +7% this morning, on heavy volume. The boost is coming from value investors, but also from some positive buzz. Rumors swirl that Eastman Kodak may be a candidate for a private equity buyout. You don’t want to buy this name on such speculation, but you do want to consider it for the real value present. Shares trade for less than 1.0 times sales, and Kodak has a number of growth drivers that should enable its rebound to continue. You may have been clever enough to pick up shares last week when they fell below $5.50, but they’re still compelling at a recent $6.15.

————————————

Investors in Borders Group (NYSE: BGP) may be a bit disappointed today. Shares are “only” up +6% this morning after rising roughly +20% in each of the last three sessions. Those gains are coming as the bookseller sports a cleaned up balance sheet, has recently entered the e-books fray and showed meaningful profit margin gains after recent cost cuts.

But this is a sucker’s rally: book sales may start to terminally decline as e-readers take root, just as what happened with CD sales. And Borders is ill-equipped to duke it out with the big boys such as Amazon.com (Nasdaq: AMZN), Apple (Nasdaq: AAPL) and Barnes & Noble (NYSE: BKS). Borders is still a bricks-and-mortar retailer, and declining sales can produce negative leverage. The $1.61 a share that Borders earned in the most recent quarter could prove to be a high point before the terminal decline sets in.