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Biotech / Medical : Genesis Health Ventures (GHV)
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To: M CAHILL who wrote (30)3/2/1999 3:07:00 PM
From: hoyasaxa  Read Replies (1) of 36
 
Fundamentals:

First, watch out for comparables. Bware comparing apples to oranges -- comparies company's fiscal years or quarters to previous periods when they or their operating environment was significantly different.
Relatedly, understanding why something increased or decreased just as important as the result. More importantly, of course, is what will happen going forward.

Second, stocks trade below book value when: future prospects are poor or questionable; assets on the book are "overstated".

To deterimine which case(s) applies here, check out the amount of goodwill on the balance sheet (and, in aggregate, what consists of book value and is this deteriorating or not] ; examine Company's debt buirden; see what's happening to all the other LT care stocks (hammered due to totally changed business environment [i.e Balanced Budget act and PPS].

That's why, a stock with a "cheap" price trading below book value might not be cheap at all but rather...it can be a valution trap.

Is Genesis a valuation trap. Maybe. Maybe not. Do your own homework then we can debate. Maybe Genesis's stock will outperform its industry peers and the indices -- maybe not. Show me more to explain why you think its one case over the other. Thanks!
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