Indifference zone is 16-24 based on visible, or near term growth and average long term earnings prospects.
A reasonable view is that it is an above average business, after all. Hence the safety as an investment in the this zone.
The kicker is hey, this may well be a long term growth story, based on demographics, brand recognition, and scale.
I am not declaring faith in such a rosy future. However, who is to say it can't happen?
Hence I am holding on. There is great option value here thrown in for free at this price.
Momentum has a way of shaking them out... but it has to be sustained. New highs on the edge of a clean chart would go far. In the meantime, the huge short interest means that NLS will continue to be a volatile one for a while.
Profit from it... if you dare.
One of the main reasons that I recently purchased a new Bowflex as opposed to one from Ebay... or from the company for that manner, was shipping costs.
The difference for a comparable used Bowflex vs. a new one was nominal... especially when taking in the consideration of shipping costs and/or the hassle of driving off somewhere, loading it, and bringing it back only to remember that you forgot something... Hell, I looked for a couple weeks in my local papers and didn't see any for sale, either... surprisingly.
Yeah. It might be a good "early warning" for saturation of fast growers. If we had historical data on the new/used spread for Bowflex models over the past five+ years, we could backtest and try to spot 2003 before it happened.
The more I think about it... the more I think that maybe ebay might be a nice market tool to gauge newer fads/gadgets... Hell, if a slightly used product, whether it be IPOD... Bowflex... or any trendy branded "must haves" can't catch a price relatively close to a new product, what does that tell you about the market demand for that product, or the company that profits from that product?
A while back I noted the prices of USED Bowflexes on ebay... they weren't that much different from the price of a new product.
To be able to maintain pricing power, especially in an industry such as this... where fads come and go, the company needs to not only ensure the pricing stability of new items... but of used as well.
As long as used models prices are competitive with new models, this will be a solid growth company. The competition, I believe, for Bowflex... is Bowflex. The time to really question this company's prospects, absent a tremendous shift in product mix (which does seem to be on the table, in which case I should say the time to really question the prospects of Bowflex), is when well maintained, or slightly used equipment is being sold at huge discounts to new equipment. That would indicate a saturation point for the product, and raise my eyebrow as to the long term viability of the product.
I work for a company that had a backlog for almost 2 decades, and have just recently started to meet market demand with product.
We don't want a company that sacrifices quality and liability for a flash in the pan earnings release... overcapacity will kill a company faster than any undercapacity will. Smart growth is growth that leaves out the 10 year view, and uses short term 3 and 4 year goals... This keeps the R&D in line, as well as capacity utilization.
I like the gradual, yet directed efforts to increase capacity...