Roger's 1997 Short Picks Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Roger's 1997 Short Picks

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: TAPDOG who wrote (8874)	12/25/1997 8:14:00 PM
From: Pancho Villa	Read Replies (3) of 9285

Tappis and all you will find this interesting. RE: (Party City Corp) PCTY. Done with the homework. IMO some time in 98 shorts will start partying big time. Revenue growth has been achived through buying franchised stores, opening new ones and about 10% growth in same store sales. One very interesting fact is that when buying the franchised stores they have never paid more than about 0.5 times annual sales and even less! However their current market cap places them at over two times annual sales! and an outrageous PE since for the first nine months of 97 they have only made $.05/share. Assuming management knows the value of franchised stores better why are the dummy investors paying more? Perhaps they have some incredibly good plans to improve profitability! Is this a typical revenue growth story with the promise of potential profits that will never come? The latest 10Q does not discuss at all future business plans and/or how they expect to become profitable. From Zacks the consensus earnings for 98 is $1.32/share with a high of 1.40 and a low of 1.20. It would be nice to have someone call them and have them explain how they expect to achive this rather challenging feat. Balance sheet is fairly clean but IMO they cannot generate the cash flow required to continue growing revenues without issuing either equity or debt. [Actually, whether this is a profitable business worth growing is an open issue!]. It is very likely these guys are creating a classic revenue growth shop, a frequent trap for dummies during a crazy bull market era and they just don't care whether adequate risk adjusted returns can be made. It is interesting to notice they were much more profitable under the mainly franchise system! One posibility is that after royalty payments franchises were hurting and complaining, wanting to get out and then some clever bankers decided to suck the dummies in by raising money to buy worthless revenue! S13s reveal insiders and the investment houses recommending the stock [JP Morgan among them] as significant 5% or more stock holders. IMO Nothing to worry about. Let's hope the split, upgrades, Zacks strong buy rating, continue to pump this sucker and them we will take over. IMPORTANT: The crucial step is have someone verify these guys have no chance to improve profits margins. Pancho

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next