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Strategies & Market Trends : Value Investing

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To: Sepster who wrote (18169)	12/10/2003 10:33:38 PM
From: Spekulatius	Read Replies (1) of 78753

Re PLMD - the company has a good balance sheet, so it's not an Enron, however its earnings are of poor quality. For example S&P's cash flow estimates differ materially from their companies own statements: Cash flow: 2001: 54.5m; 2002: 66.4m; 2003: 82.9m S&P cash flow 2001: 54.5m; 2002: 66.4m; 2003: 46.5m Just a preliminary glimpse at the balance sheet confirms the suspicion that earnings & cash flows are overstated by activating what is usually considered a business expense. From Yahoo balance sheet data I deduct that: - current assets have increased by 10 m$ over 9 month - total liabilities have increased by 7 M$ (why have LT liability charges almost doubled in 9 month to 20M$ ???) - Property plant and Equipment has increaed by 12M$, intangible assets have increased by 12M$ !! - payed about 10M$ in dividend - the company does not seem to buy back stock The earnings quality issues as well as the issues with Medicare, FBI investigates as well as the fact that quite sophisticated shorts like Asensio are betting against PLMD are strong red flags to say the very least. For me, earnings and management quality are more important than valuation. That is a lesson I learned after investing in EP, ELN, MIR and WCOM.

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