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Strategies & Market Trends : Roger's 1997 Short Picks
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To: TAPDOG who wrote (8874)12/25/1997 3:59:00 PM
From: Pancho Villa  Read Replies (1) of 9285
 
Tappis: RE PTCY. Nice pick! how/where did you find it? After a preliminary look:

Plus side [for shorting]:
1. the stock looks quite overpriced, profitability is terrible [can it be improved? are they investing for future growth?]
2. the business is easy to understand. No big surprisses like a new drug approved by the FDA or a revolutionary new technology anouncement.

Minus side:
1. even if they are wrong, there is a long string of recent analyst upgrades which may carry momentum.

2. The revenue upward trend is quite impressive, even same store sales.

I am interested enough to put some time on reading the SEC fillings in detail. Today is a rainy day at the beach [as people may have guessed from my many posts at SI].

Pancho

I started reading the last 10Q... so far the only thing I did not like was insiders selling stock along fresh shares in the May public offering. They have shown impressive growth in 97 and remarkably they are not to far from breakeven. Cash flow from operations is very negative due to increase in inventories and others... this is reasoonable given the sotrong gorwth. The key is whether they can be profitable once growth stabilizes. Gross margins are at around 29% not so bad if the number of stores/royalty revenues increase economies of scale significantly.
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