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Rosetta Stone, Inc. Message Board

  • investora2z investora2z Jul 16, 2013 7:29 AM Flag

    Fundamentals need to improve

    The stock has done well over the last one year with a 24% rise. The last three months have not been very good as it has remained flat during the period. Over the longer term, it has done badly with a 44% decline since the beginning in April 2009. This is mainly due to the fundamental performance of the company. It has reported losses in 2011 and 2012, and the trend has continued during the last few quarters. Except for Q3'12, it has been reporting losses. Even the revenues have not grown much over the years, with a 8% rise since 2009. This has been a major drag on the stock, and the company is now having an accumulated deficit of $16.7 million. The company has no debt on books, and had around $139 million cash on March 31. So liquidity is not an issue right now (current ratio of 1.88), but the company needs to bolster growth and generate profits. The company is leveraging technology to build new products and offerings for language learning, and the offerings may yield results over time. The company is focusing on the trends related to mobility and interactivity, and cloud-based language-learning solutions. Improvement in economic conditions will also help increase discretionary spending, leading to growth in the market. However, the competition is also strong with players like Berlitz International, Simon & Schuster, Random House Ventures LLC, Disney Publishing Worldwide and McGraw-Hill Education being formidable. Further, the market is highly fragmented with different business models, and methods of teaching languages. But the opportunities are also growing. Social media company Yappn (YPPN) provides a multi-lingual social platform where people can meet, chat etc. without worrying about the language they speak. The interactions are translated into the user's native language automatically, and hence communication is easier. Rosetta needs to turn in profits soon so that the uptrend does not lose steam.

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