Paul,
Not to be disrespectful, but if you've ever looked at a 10-Q or 10-K or even an annual report, cash flows is split up into three sections: operations, investments, and financing. Cash flow from finances is a very real part of cash flow, but like I said, isn't used very extensively in determining the operations of a corporation (that's what CFO is).
You are right that CFO begins with Net Income (this is called the Indirect Method) and then you basically add back non-cash expenses and subtract out non-cash revenues. However, whatever way you do it, CFO is simply the cash brought in (or paid out) for operations from a company for a period. Depreciation and Amortization, as you say, are non-cash expenses, AND HAVE NO EFFECT ON CASH FLOWS. The addition of these things to Net Income is simply a way to calculate the cash flows. FOr example, if PRST depreciation expense on a building was $1 million this year, but they decided to switch accounting methods for depreciation (say to accelarated from straight line), they may have $2 million in depreciation expense for next year. THIS HAS NO EFFECT ON CASH FLOWS. Just wanted to clear that up.
Listen, you and I both know that PRST is certainly not a $20 stock. I'm not saying it's a $70 stock either, but $20 is ridiculous. Maybe one reason Imation doesn't make a large note of thier PRST deal is because Imation is 40 times the size of PRST in terms of sales!! Obviously, this contract will probably effect PRST more than Imation.
I'm still not sure how the bears are still as bearish as they were 6 months ago after all the positive news that has come out. Every time good news comes out, the bears come up with something negative to say about it. I'm also not sure why the bears don't sit down with a spreadsheet and see that PRST will get over $20 million in revenues in the 4th quarter just from Quickie kit sales. Once again, the bears have no idea what they're dealing with here, as they keep comparing it to regualar companies and not a corporation growing at 100% a year.
Lastly, don't knock Lutts. If anyone here has as good a track record as him I'd like to follow their advice. SOmething like 17% for the past 20 years! If his critics knew anything about his investment strategy, they would know he has some not so good years like last year and some awesome years like 1991 and 1995, both when his Model Portfolio was up over 80%.
acey |
