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Nautilus Inc. Message Board

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  • astral_tsar astral_tsar Apr 9, 2003 10:51 AM Flag

    Re: Motley Fool Piece is Wrong

    Long-term sentiment: could be strong buy. NLS management, work with me here.

    Heh. Well, I agree with the sentiment. Forget the war and the 'economy', things will bounce back. Are we old ladies here? Are we all 8-week arbitrageurs? Can we see the next year of consumer spending in every ridiculous story on some money-losing web site? Of course not.

    We longs do, however, have one scary Achilles' heel. We are very vulnerable to continued "diworseification". Management has been spending most of our profits acquiring companies much less interesting than their own core business. These things are write-off bait and explain why the market is treating real earnings (owner earnings or some defs of "free cash flow") as about $0.75. Profits less unrecoverable capital spending. Either show us some results from the Stairmaster, Schwinn Fitness, and Nautilus acquisitions or put the money in something safe.

    As soon as acquisitions and high capital spending cease for good, free cash flow will be nearly equal to reported profit. So we'll have real owner earnings at the $1.50-plus level, justifying $18.00 stock price while we all wait happily for the economy to co-operate again and perhaps catapult us much higher than that.

    Otherwise, and, Mgt., pay attention because this is your decision, if the diworseification continues as before, this stock will continue to be priced for its $0.75 owner earnings: perhaps $9.00.

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