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Strategies & Market Trends : Low Price/Cash Ratio Value Stocks

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To: stock leader who wrote (237)	9/5/1999 11:38:00 PM
From: Q.	Read Replies (2) of 1931

WKGP has the usual traits of a stock selling way below cash value: a very small market cap and a significant cashburn. The cashburn appears to be $2.8 M per quarter. With $19 M cash, that gives them 7 quarters before they are bankrupt. The market is apparently pricing the stock at some forward value of cash, rather than at present value of cash. Before you buy this stock, you would be wise to have a deep understanding of the co. (which I don't have) that leads you to believe that the cash burn is likely to reverse itself within a few quarters. Some companies that find themselves in this situation have been historically profitable, but just happen to be in a cyclical industry sector that is in a down cycle. This is a situation I prefer, as you might expect that the sector downcycle might last less than 7 quarters and that if it did the co. could reduce costs to survive longer. On the other hand, if the company is more or less a development stage company with significant R&D expenses, which might be the case here, then you have to have some knowledge of the R&D and the future marketplace of the future product, and I have not researched these for WKGP. All I looked at was the financial statements in the 10Q edgar-online.com I did no further DD. Hope that helps.

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