So you're a Peter Lynch prostelyte?
to favour cash flow analysis as it wraps a company
up in a nice tight little valuation that you can
check using several different methods.
exclusively with earnings multiples can leave holes. But the
cash flow doesn't lie, and in the end it all comes
down to how much cash an entity can generate.
As far as figuring out what's going on with
depreciation and ammortization charges, that's why my middle
initials are M, D, & A.
By the way; What firm were
you trading for? In NY or regional?
I've been pure equities for 20 years..I rarely
trade bonds, only on very severe sentiment
measurements. Sentiment is one "metric" I use to buy/sell...the
sentiment on PETM(and retailing) is becoming increasingly
bearish..to me it becomes more attractive, the more people
Quantitatively, you could buy
PETM based on the PE/growth rate "metric"...lets say
that PETM estimates only lowered slightly to $.35 this
year and $.50 next year (down from $.40 and $.56). A
common approach on the conservative side is to take half
the EPS growth rate (25) times next years
An aggressive valuation is the full growth rate (50)
times the next years estimate...$25. Obviously not a
"cash flow method", but one that has worked for me over
My discomfort with
depreciation/amortization is based on wether somes expenditures become
assets or costs. Secondly, AOL was an example of the
leeway afforded certain amortizations...costs per
subscriber were being amortized over five years, but their
subscriber turnover was 50% annually...a very simplistic
example but you get my drift.
I would say good
luck with your cash flow analysis, however I must add
that I hope you don't get a chance to buy any at your
Mollysback...thanks for the words of encouragement regarding the tone
of my reply. I've seen too many boards temporarily
ruined by a running feud over nothing but testosterone.
Obviously you never worked either on a bond
trading desk or in a high yeild department or your
opinion about EBITDA would be markedly different. (The
Lord came to me in a dream and said; "Let there be
FASB." And then there was FASB. And it was good. And
FASB begot GAAP. And GAAP was good. And GAAP tamed the
mighty demons Ammortus and Deprecos, bringing peace to
the land.) I might credit you with having worked on
an arbitrage desk but all those people are insane
As far as recent bond pricings have you
followed any bond issues for anything in the hotel
industry? Even the blue chip types? 500-600 basis points
over LIBOR just to start. And quite frankly PETM will
have more econ related issue than anything in the
hotel industry where margins are much fatter.
So what's your "metric" as you put it? I posted my
numbers. What are you looking at that us cash flow
balatta, you seem like a good person. You handled
your response with dignity. We need more posters on
this BB, like you, that ad to the overall
I always thought that any debt rated below an "A"
was considered junk bond quality. There are an awfull
lot of very good companies that carry a BBB
I'm aware of what EBITDA is, and have never
really been impressed by it, as both depreciation and
amortization are numbers that can be misleading, depending on
the type of business you're in, and the rate of
I'd appreciate a few examples of other "credit
worthy" companies that have sold debt priced as
I've worked on several institutional trading desks and
know that when a PM decides to eliminate a position,
they tend to just "blow it out"...in many instances
this creates a buying opportunity. Coincidentily the
retail sector itself is under increased selling pressure
by institutional holders.
I was an
investor in PETM before it went public. I sold on the way
up to $40 originally because wall street became
overly enthusiastic regarding "big-box" retailing. I
believe PETM had to do exactly what they are trying to
accomplish...cut costs, consolidate their U.S. store base, punt
the U.K. operation (even close it outright if
necessary) and explore any opportunities in "e-commerce".
Almost any valuation method you use has some subjective
component.The institutions that are selling are raising cash to
redeploy to areas they find more appealing. The
institutions that are buying are probably attracted based on
some type of valuation metric..and tend to be more
patient regarding the efforts to transition the company.
I am currently in the latter camp..time will tell.
My cats eat and crap the same as last year, and
their consumption remains steady. Unless I start
feeding the dog next door.
You guys are all WET WET
WET.....I'll buy all what you do not want.Fickle irrationale
fanatics of the markets Profs. Graham and Dodd called you
all. Take you EBITA and stuff it where the sun dont
shine they had none for several quarters. NOW they have
some you Bozo. Focus on the facts......You could not
identify value and a turnaround if it smacked you in the
face.....Go buy Amazon and Yahoo for a while... so you can
batter that badboy too.
PETM is a specialty retailer. Right now this area
is just getting hammered as personal consumption in
the US comes down. When personal consumption falls
it's usually the specialty retailers that feel it
If PETM has even a slight downward flinch
on their top line, with their low operating margins
they are going to get absolutely hammered. (We've
already seen some of this.) With a projected slow down in
the economy through the end of the year, institutions
are probably looking to dramatically reduce their
exposure to this side of the market. Which is why I can't
see anyone trading this company based on earnings
And actually I don't hate Leaf (he could
sure throw the bejezus out of the ball up at WSU) but
it seems as if he needs to get his head screwed on
straight. Maybe we could all chip in and buy him some