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Nautilus Inc. Message Board

  • hillbillythekid77 hillbillythekid77 May 4, 2005 12:32 PM Flag

    They are doing EXACTLY the right thing.

    One caveat... they need to stop granting options.

    But this is exactly what NLS should be doing, and what others should be doing as well.

    No debt to work off, tons of cash. Soak up the liquidity to build shareholder value. One time "special" dividends are horrible to the stocks and the bottom line.

    Dividends are helpful to the shareholder, but are only as good as long as they are able to be paid.

    The buy back of shares is the gift that keeps on giving.

    Bravo to management for recognizing this...

    As far as "being worth $27"... Remember, in any market, it is only worth what you can sell it for.

    Now I just have to find a spot that I feel comfortable entering in...

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    • It's not only MSN. Most good boards are the ones that people don't use much.

      This board is good now, but when NLS was popular, it was horrible. We had some kid who kept screaming that Nautilus was about to go into Chapter 11, another guy who insisted that more inventory turnovers per year was a bad thing, a "professional expert witness" who wanted to discount future earnings at 26% per year, and no matter how many people explained these things to them, they just would not listen. It was insane.

      I think once you have about 10 regular posters, one of them is gonna be a psycho. That attracts more psychos, and bye bye board.

    • Too bad more folks don't use the MSN boards... most of them are shut down due to spam and lack of use. I prefer that type of forum where a thread is started and replies don't lay waste to other topics.

    • Good point, though I think that's two different things. I would make a "style box" for each board. Accuracy can be low or high, and civility can be low or high.

    • Sure...

      : )

      (funny how some of these boards can be civil, and others are pure trash, huh?)

    • It is useful and dangerous as it is with so many other good things in life.
      The FRE board is inahabited by too many statists.
      What do they know to bet that disaster is a foregone conclusion!
      Don't want to discuss this anymore, not on this board.

    • I can sympathize with your desire to be positive about the stock. But lemme explain my complaint about a $27 buyback from what I think is the shareholder point of view.

      Cash is about $3 per share. So at $27 the market is valuing future EPS at $24. If NLS spends the $3, it can buy back say $3/$27 = 11% of the shares, boosting future EPS by 12.5%.

      If the market is right to value future EPS at $24, this is an even trade: 112.5% of $24 is $27 again. (The cash will be gone.) If future EPS is worth more than $24 in present value, then the buyback was a good move. If future EPS is worth less than $24, then the buyback was a bad move.

      But $24 is 24x what the company has earned for the past couple of years. The present value of $1 per year going out is definitely less than $24. Considering equity risk, it's probably worth more like $12 to $14. So considerable earnings growth is priced into the buyback price. If that growth doesn't happen, then the company would have done better paying a dividend.

      Looking at it another way, if you got a $3 per share dividend, would you use it to buy more shares of NLS at $27 and hold those shares for the long term? Or could you do better, perhaps on recent Buffett purchase Anheuser-Busch?

      As we approach the share prices at which shorts made (well, could have made :-) a killing, it's worth wondering about overpayment risk.

      • 2 Replies to astral_tsar
      • The only sympathy that you need to have for me is that I got out before today's run... I did make money though, which is the name of the game.

        What you are explaining could be said for companies in a hell of a lot worse condition than NLS. As I remember it, I calculated $27 as being the target about a month ago to equal the 10 year annualized 4.25% gain in the Treasury market... Looks like the NLS horse won that race.

        The company made NO promises to buy back the shares, merely an authorization that will expire 3 years from now. That doesn't mean that they will pay $27. So this is not like they've leveraged themselves out of other possibilities.

        What you are suggesting in preference is doing what MSFT and a number of other companies did, which ultimately leaves the balance sheet vulnerable.

        The company added over 20 million (the exact number escapes me at the moment) to their cash reserves in the last quarter, which is not historically their strongest quarter. That cash, combined with higher short term interest rates provide even more possibilities for management

        The market is a discount mechanism... the discount here is that earnings growth is not only robust, but is accelerating. Might the reason that you do not see the value here is because it is no longer a value play, but rather a growth story?

      • I agree that 27 is not a compelling level to buy back the shares at. But I can live with that. After all, there may well be considerable intangible value in the brand plus demographics, as the resurgent direct sales with fat margins has amply demonstrated. It does have a moat!
        Competing use of my cash? Well, interestingly I have also bought the BUD recently. But I don't view it as competing as much as complimentary. It has a different risk profile.

 
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