PPD (Pre-paid Legal Services) on the move Message Board

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Non-Tech : PPD (Pre-paid Legal Services) on the move

PPD 47.28

0.0%

Dec 8 4:00 PM EST

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To: SC who wrote (773)	2/20/2000 2:15:00 PM
From: Ted The Technician	Read Replies (2) of 801

I appreciate Mike's input regarding the advance commission and cash flow issue. After digging into the issue further, I found that all of PPD's earnings are essentially going into paying advance commissions. Cash is what the company uses to "grow", and if all of the cash is going to the associates, what will the company have to grow with? I can now see where Mike is coming from. If one subtracts the advance commissions from the earnings, one would get numbers around zero cents per share for the last couple of years. On the other hand, PPD is fundamentally worth more now than it was a year ago. The advance commissions are like loans that a bank would make. The amount of money that the associates owe the company has been growing every year. PPD has grown its "loan" portfolio between 44%-53% over the last year. I see this portfolio as an investment in the company's "factories" or "services". It is an investment in its most important asset - its associates. One could consider this investment like an "R&D charge" - R&D charges are often added back into the earnings for valuation purposes. In this case, the "R&D charge" is already factored into the earnings. How is the company funding its dramatic growth? Could it be that this growth is being funded at the expense of its shareholders? Its number of shares has grown only about 5% over the last two years. Bank loans are absent from its balance sheets (even Yahoo shows that the debt/equity ratio is very low). So with no equity or debt financing, how does this company grow? It must be internally-generated growth. Any ideas out there? During the December quarter, it would appear that the company found that it generated too much cash and decided to purchase back its stock. Yahoo shows two analysts with strong buys. Ted the Technician

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