While poor management and Weak products/services are good reasons to avoid a stock [perhaps short], they are usually rather difficult to judge - at least from afar and aren't intrinsically indicative of financial weakness. May help as background, if quality can be judged.
On the other hand, crooked management...guys with a history of ugly deeds and fun with numbers accounting, if you can find out about it, would be reason to sell and analyze for possible short if shortable.
Again, it's the finding out about it that's tough unless the guy has a rep.
Quick ratio standard is about 1, wouldn't it need to be a bit lower than that to signal difficulty like < .8 or .9?
May seem to be quibbling here but am looking for at-a-glance, objective indicators that say "TROUBLE" and not just indications of imperfection.
Aren't floorless converts pretty tough to identify...almost to the point of you don't recognize them even when your reading the SEC or PR covering their issuance. Any quick and fairly sure recognition strategies would be appreciated.
Aging payables: This sounds good, but is it a timely, easy to find number?
How bout some sort of interest or fixed charge ratio?
As a background item...combined with others, how bout a sea change in the industry that makes operating environment more difficult: Drop in commodity prices like oil, metals..etc; how bout impact of the net on existing business models? Again this isn't intrinsically indicative...even if CompUSA is hurt by drop in PC prices, I still wouldn't grind their numbers with favorable ratios and cash...but a company with marginal numbers in an industry undergoing stress - that would be worth further check and might indicate snugging the ratio's. |
