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Strategies & Market Trends : Pancho Villa's Short Analysis File -- Ignore unavailable to you. Want to Upgrade?

To: TRIIBoy who wrote (13)	9/27/1998 11:39:00 PM
From: Pancho Villa	Respond to of 287

PCTY business and financials suck. Look at their most recent 10Q. Look at the balance sheet: look at inventories and prepaid expenses vs. year ago. they are hiding expenses in the prepaid account and their inventories are going through the roof. Leverage has increased significantly (not as bad as BFT though) as they buy their own unprofitable stores through financing (they do not generate free cash flow). Why do you think the franchises are selling at 0.6 times annual sales and happy to get out? They are buying stores even from former executives. Do you think these guys don't know the business? they are glad to get out. Look at the income statement: huge revenue increase vs. year ago but the earnings didn't move. Their margins are a shame: less than 2% on sales after tax despite taking it easy on expense recognition. look at the cash flow statement: look at CF from operating activitiesn (21 million negative), compare it to last year (5 million negative) PCTY will see $5/share IMO it is a great short pick. And these was during the good times. Wonder what will happen when the sh*t hits the fan. BTW I loved your question! made me do some work on a late Sunday.