Roger's 1997 Short Picks Message Board

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Strategies & Market Trends : Roger's 1997 Short Picks

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To: tcarnes who wrote (7507)	11/25/1997 7:43:00 PM
From: Bill Wexler	Read Replies (1) of 9285

P/S doesn't make any difference for BFIT. If you look at many retailers, they usually trade at very small P/S. In those cases, investors are more interested in free cash flow. Take a look at UAG and you'll see what I mean. BFIT is an operation that is saddled with enormous debt and no real opportunity to grow. Check out their last 10-K. Revenues have been essentially flat for the last five years. the only thing that has grown is their debt. They were forced to nearly give away memberships to get some cash in the business. So what is their plan now? 1) They massively dilute the stock by offering an additional 8 million shares. There are now 20 mil shares outstanding. This stock was trading below 5 when there were 12 mil. shares. 2) They are cutting costs (translation: firing employees and cutting back on services). 3) They are raising prices. (That always works real well in the saturated markets where the clubs are located). 4) They are going to sell health food and apparell (yawn). Health clubs are lousy businesses. BFIT is extraordinarily overvalued.

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