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Strategies & Market Trends : Free Cash Flow as Value Criterion -- Ignore unavailable to you. Want to Upgrade?

To: TimmFred who wrote (81)	11/2/1997 12:08:00 PM
From: jbe	Read Replies (1) \| Respond to of 253

Timmfred: You're right on one thing. Coinmach Laundry(WDRY) does have a lot of cash flow (thanks to high revenues). It also has fair free cash flow, if that is calculated simply by subtracting capital expenditures from operating cash flow. But if you're using that simple method of calculating free cash flow, you MUST look at your numbers in relation to the company's debt. And here I would say that WDRY is not just "highly leveraged": it is humungously, impossibly leveraged. A debt/equity ratio of 19.96!! Whew!! What makes it worse is that WDRY has yet to turn a profit. With a negative p/e, negative eps growth, an ROE of -98.13, how is it going to pay off its debt?? If you have solid reason to believe WDRY is going to have 1) a fantastic surge in sales, 2) a corresponding decrease in cost of sales & therefore an increase in profit margin, then you might conclude WDRY can turn the situation around. I don't know anything about WDRY myself, and so it looks more like a candidate for bankruptcy to me. But perhaps others on this thread will disagree, so don't let me discourage you.