Congrats to RAD investors. Be Careful. RAD's Last Hurrah is Approaching
Yeah, I admit it. I thought this quarter would do them in. Turns out it did not.
But, just like the tech bubble in the late 90's, RAD's run-up cannot be sustained with poor sales comps. At some point, you can no longer squeeze additional earnings out of decreasing sales.
Surprising, unaudited earnings comps can be a boon for share prices, but the underlying sales problems aren't going away. While smart investors will take the money and run, others will bask in their success and project future glory while getting the rug pulled out from under them.
Hey pal, what's Wag's P/E ratio? It's 24.29, what's RAD's P/E ratio just after the latest earnings report? 13.74 - see a big difference? There's a lot of value in RAD at these prices, and I own a small business and let me tell you, increasing profit margins through efficiency and business strategy pays itself ten-fold. Because now you are lean and mean and have profits - now you can reinvest those profits to fuel growth again. Every business that squeezes every last penny to increase profit margins through their existing infrastructure before they even think about expansion is the kind of business I want to be in. Seen it first hand with my company. Who would you rather trust a large inefficient company throwing money at expansion, or smaller company squeezing every last drop of efficiency before even considering expansion? And as to their debt. They're doing what America should be doing, borrowing at these insanely low interest rates in order to rebuild their infrastructure for future growth. The people at RAD are smart - just because everyone has a Spending phobia these days doesn't mean it isn't the absolutely smartest thing you could do, borrowing at high interest rates - which is coming, is the stupid thing. Borrow now while interest rates are favorable, and reap the rewards when growth comes back - while everyone will be playing catch-up and by then interest rates will have sky-rocketed.