bob,
With all due respect, i really have to giggle at this "bancruptcy predictor." I guess this means there is still hope for PEOPLE.
I spent five minutes looking at jrc and determined that it is nowhere CLOSE to going bankrupt, now or anytime in the next millineum. for one, the company has a phenomenal pre tax roa (ex cash, and goodwill), at least two to three times the profitability of the typical sp500 company. While it carries a big debt load, it can easily SERIVCE that debt. If you had a HIGH, PREDICTABLE, and rising income, you could SERVICE a lot of debt too, couldn't you? Especially if you used your debt to increase your income, which is what jrc is doing.
The company generates an abundance of free cash flow, which is slowly RISING. Some analysts suggest that this dynamic, combined with a leveraged balance sheet is a good thing. Why? for one, the equity investor has a leveraged return. The company likely will use its free cash flow to pay down debt. Each $/share of debt the company can pay down ADDS one $/share to the implied value of your equity stub. You don't have to worry about capital allocation.
With all due respect bob, I think it's time to chuck ALL the formulas and get back to looking at companies like an owner/acquirer does. These guys don't PLUG numbers into formulas.
That being said, I personally don't find the company attractive, only because I like some things ( which happen to be small and overlooked ) better. But I wholeheartedly agree that it is places LIKE THIS where we need to cast our lines. |
