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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis
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To: drakes353 who wrote (2131)3/19/1999 11:01:00 AM
From: Q.  Read Replies (1) of 2506
 
Drakes, PCTY does look interesting. Looks like the co. is basically an unguided missile, with rapid growth and bad financial controls.

It's clear from their announcement that they are likely to join the 'e squad'.

What isn't immediately obvious to me is whether the co. has any other serious problems.

Noticing that they are a franchiser, I first wanted to see if they were doing anything like Einstein Bagels was doing, in lending their franchisers lots of money. It doesn't look like they are doing that.

Then I looked at their general liquidity situation. I computed the "Altman Z score" Subject 26586 for the company and got a value of 1.98, which indicates they are at risk but not in any immediate peril.

To me it looks like their biggest immediate threat is the one that is identified in their news release that you gave. By not being current in reporting, they will not be in compliance with the covenants of their long term debt. However, I think the risk of the lenders suddenly pulling the plug on long term debt are not very great.

Meanwhile the valuation of the stock does not look too high, based on a comparison to other companies in the same retail industry:
yahoo.marketguide.com
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