Has anyone thought about how the change in financial health at SPLS might explain the collapse in stock price recently. Compare the cash and LT debt situation in the recent 10Q with a year ago. SPLS has used about $400M in cash and taken on another $400M in new LT debt to fund recent acquisitions. This might explain the recent skittishness as some might knee-jerk to this as an indication of souring business prospects.
IMHO this is not a reason to be concerned fundamentally. Business seems to be running well and cash flows are not only enough to service (and pay down) the debt but also to rebuild the spent cash over the coming year or so.
good point. It's hard to tell what spooks the street at any given moment. On the other hand, a growth company that DOESN'T take on some debt to grow the company would make me even more skittish!
I think the year over year performance of SPLS ultimately settles the issue by indicating very good growth comensurate with the assumed debt, and of course excellent corporate management.
It's hard to ignore a year long slump. And it tends to lead people to belive that there's something out there we don't know about. There are no secrets kept that long! We all have the same information that Wall Street does on SPLS. It's just a "market thing" we have to endure, or better yet, take advantage of by buying up more. You can either let an unwarranted slump piss you off, or make you more money. I choose the latter!
SPLS after hour trade 20 5/8 on the CNBC ticker. That's at least some relief! :)
I would've bet on SPLS being back up in low 30's by now, great earnings and this is their strongest quarter, back to school etc.
Suprised it's still way down here at 20. I'd be expecting SPLS to pop back to mid 20's soon; I'm almost always right on my stock picks, eg OMPT CMRC QCOM but SPLS seems to be lagging. I hope is gets back up soon. Look at NOVL recently, my other favorite daytrading stock. It just had a big run; hoping SPLS will too.
Good luck SPLS folks. Hmm...this one would've been in my investment portfolio if I'd kept one (but I'm a daytrader.)...
True that some debt is good to make a company grow. My only issue with debt is that it dilutes my stake as a shareholder (those nasty Debt/Equity and cash/debt ratios comes into play here). If high amounts of debt are allowed to hang around then the ownership stake of the shareholder is reduced and transferred to the bondholder. Since my stake as a shareholder is reduced I would expect the value the "street" places on my stake to be reduced. What has happened recently at SPLS would seem to indicate this (although the situation at BBY, which is also way off its recent highs, is much stronger than a year ago...).
Since earnings and cash flows at SPLS are far more than needed to deal with the debt situation and since the notes are due by 2002 it would seem that the company is not planning on leaving my stake diluted for too much longer. Accordingly, I feel comfortable taking a stake at these levels.
BTW, I am long 200 at 21 and have written 3 March puts at a strike of 17.5, just in case the street thinks I am crazy for believing as I do. ;-)
I agree that a cos. taking on debt to expand itself is useful as long as it is done responsibly. In the case of Staples where expansion of the business from B&M to .com is the objective this was a normal business move. The fact that the debt load is manageable given the revenue and cash flow is a good sign. The interest on the debt, however, is a bit disconcerting. I would not expect an established business to get basically a homeowner's rate of 7.75%. By contrast T, with a much higher Debt/Equity ratio, can manage 5.5% for its debt issues. Is this higher rate normal for a co. of SPLS's size?