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Rocky Mountain Chocolate Factory Inc. Message Board

  • soxtobeinnj soxtobeinnj Mar 30, 2005 2:49 PM Flag

    Let's Talk Reality

    I am a very frustrated RMCF short-seller. Having followed this since last November, I recognized that this is a very good company and one worth investing in. That said, when it shot up on the CNBC story, I thought that the jump was too excessive and shorted it. So, I am somewhat kicking myself now.

    At the same time, I cannot validate the prices we are now seeing and would welcome alternative perspective from my own. Among the things which really bother me:

    * My quick DCF analysis, even with very aggressive growth targets and cost control assumptions, doesn't yield numbers higher than the high teens.

    * RMCF's P/E ratio has jumped by 70% to a seemingly irrational level. Projected earnings are not so phenominal to pass this off as the market factoring them in, in this way.

    * RMCF is trading at multiples significantly higher than nearly every foodstuff manufacturer I could find.

    * The dividends, while terrific, seem to indicate that management doesn't see a better use for the free cash. Does this not enter into question whether the firm wants to the same levels of growth as the market would want?

    Anyway, I probably sound like I am trying to rationalize my move (I am) so I would just be interested in some perspective on where this whole thing is going.

    Thanks.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Ah...vindication comes just 5 days later!

    • sorry guy, (your hating life) As long as you learned a valuable lesson " NEVER short a stock that is Bullish..... NEVER.."

    • I would be a little afraid of shorting this stock. Although, as a long, I also think it might be slightly ahead of itself short term,there is a very small float and could easily become a 'trend' stock and jump rapidly. We saw signs of this after the CNBC mention. One or two 'big fish' decide to buy and it goes out of sight. I believe there are much beter companies to short with a lot less risk. My bet is that my shares of RMCF will be worth a lot more two years from now. in the meantime, my shares are not available to cover. Good luck!

    • Analyst appearance on CNBC touting RMCF: 2/11.
      RMCF's low that day (prior to appearance): $16.60.
      RMCF hits high today, 03/30: $25.00.

      A little bit o' math...
      Gain: +50.60% (+$8.40)
      32 trading days
      Avg gain per diem: $0.2625

      I agree that we've come too far too fast, but that's also what I thought earlier on as well.
      Then again, every stock has a top, thin float notwithstanding, so I'd venture to guess that we've gotten closer each day.

      Good luck,
      Nick

    • a few thoughts:
      1)can't comment on your dcf as I don't know what factors you utilized. But there is very little need for cash(capital equipment) in rmcf's biz plan. Actually I believe they have under utilized production capabilities.
      2)Ben Graham's book "The Intelligent Investor" (I've read it twice and it still hasn't taken hold) says that it is okay to pay 1.5x growth rate for a proven growth company. I'll find the page if you want.cont
      3) most food stuff mfg are in a slow growth mode and are not generating the cf that rmcf does.
      4)I'd rather have rmcf pay a divd than do something stupid with the cash, ie Bernie Ebbers, Dennis K., Ken Lay et al. Remember rmcf has more cash flow than necessary.

      good thoughts..just another perspective

      My concern: Jos Scumpeter's destructive capitalism. rmcf needs to be planning some new products to put through the stores. I've said before I suspect they want to grow out their distribution than pump more product through them.

      Oh and there is always a specualtive aura about rmcf being taken over as tried twice before. Lots of companies can produce great chocolate but good distribution is even more essential.
      Thoughts?

    • We first purchased a small amount of this stock shortly after visiting a store while on vacation in Laughlin, Nevada last fall. We liked the chocolate and the manager of the shop really sold us on the management. We purchased some for around $13 and then after the CNBC story dumped it at around $17 only to eat crow and buy back more at around $20.
      There volume has increased significantly and there isn't a lot of float so I think the price will stay up although it may drift sideways for awhile.

    • i think you said it best you recognized this was a very good company. in the last conference call an analyst asked if there were any plans to buy back shares. i believe the answer was we are not going to chase it. so i think the insiders had a good idea what was going to transpire in a few weeks. after the cnbc story there was a fellow who made fun of a few investors on this board when he shorted on a big $2 move. since then a few day traders have jumped on board and started screwing around with this. me im just enjoying the ride for the past year or so and looking for some more stock dividends, and dividend increases. also i left jersey a few years ago for a great retirement out west and thats paying dividends too. good luck in whatever you decide to do.

 
RMCF
13.63-0.35(-2.50%)Jan 30 3:55 PMEST

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