The Most Overpriced Stock in the Market

Including A letter I wrote to a friend today. Stratasys Limited (SSYS) Nasdaq: $87.00 is trading near it's 18 year high of $87 set this past week. Q3 2012 operational cash flow= -($9million) -262% decline Q3 2011 operational cash flow+ $5million 9mos 2012 : $2million in operational, 9mos 2011: $12million in operational cash flow MARKET CAP : $3.4 billion shares outstanding : 41 million average volume this week : 350,000 shares a day company just acquired a private company for $1 billion the first week of December. Stock is Grossly overvalued. Here is a letter I wrote to a friend with links on my research. it may take some time to read it all but if I'm right, there would be a big pay day on the short side trade. My SSYS research has two issues, one is the wild valuation but the second point is the Transparency/Disclosures from the Company and the Online Financial Sites that are using old data but are not disclosing that it is old data. (in other words every mom & pop in the world is home reading old data and have no clue that it's old data). A. SSYS: The trouble I have with SSYS is that the company generated negative operational cash flow for the 3rd Quarter of 2012. Q3 Operational cash flow was Negatice $9.6 million down from positive $5million the prior year Q3. (over 250% decline.) 9mos ending Sept 2012 operational cash flow $2.3 million, $10million decline vs. 9mos ending Sept 2011. (82% DECLINE.) Poor EPS Quality The operational cash flow for the trailing twelve months ending Sept 2012 was a mere $11 million, down 42% from the prior year comparable ttm. For a business generating only generating $11 million operational cash flow to be trading at a $1.8 billion valuation is ridiculous. imo. (that's over 163X operational cash flow). I understand that sometimes small cap super growth companies have such high high multiples, but htis is a company that's been around over 18 years and has only grown these past two years primarily via acquisition, doesn't really excite me. B. On another note: "Be careful When you read any Number on Any Site" Morningstar data regarding SSYS is using November data. The acquisition of Objet was completed the 1st week of December. Since the first week of December the new company Stratasys Limited has 41 million shares outstanding. Therefore the current market capitalization is $3.4 billion. Motley Fool and other Analyst writing about the stock have put out estimates. Not sure where the EPS estimates come from, but are those estimates based on 21 million shares or 41 million shares outstanding? I've been trying to find out. I was on the Needham Conference call the other day and the Company gave NO GUIDANCE. NONE. they made a slight mention about the cash position of the 2 companies combined "as of the 1st Q last year 2012" was $140 million. (so what, right?) I contacted the Wall Street Journal yesterday to get some clarity on why data is unclear, here is there response. The Journal responded by saying that the data won't be updated until the company reports their Year end numbers which are expected in February. Last night I listened to the Needham Conference call and SSYS announced that their year end numbers have been postponed from Feb to approx March 4,2013. Until those figures are updated, the public only has the data available on ZACKS, Yahoo Finance, Bloomberg & Morningstar, CNBC,TheStreet,. The problem is each of those sites are using old data that won't be updated till hopefully March. This leaves many unanswered questions: What is EPS? ball park? What is PE multiple? ballpark? To much uncertainty for anyone to speculate on. What I do know is that the two business valued themselves for the purpose of the merger at ($1 billion for Objet) & ($1.2 billion for SSYS) 45% & 55% Why the shares are hanging around a $3.4 billion market cap 40 days later is questionable imho And here's a nice lawsuit that shareholders in Minnesota brought against company to squash deal only to have SSYS settle with them Have a great day tom 908-477-4796 Disclaimer. All Newsletters, published by Equities Research, LLC , does not constitute a recommendation by Equities Research, LLC to buy, sell, hold any security, or to follow any particular trading or investment strategy. Also, the information provided should not be construed as an offer, or a solicitation of an offer, to buy or sell securities. An investor's best course of action must be based upon individual circumstances. EquitiesResearch.com shall not be liable for any damages or costs of any type arising out of or in any way connected with your use of The Newsletters, or any of our services. EquitiesResearch.com, its officers and employees may buy and sell any position in the securities or companies mentioned herein.

Herb Raised My Red Flag on Chipotle @$430

Wall Street Journal Online Responds to My SSYS Email

click to original Equities Research post regarding Stratasys

Hi Mr. Renna,

My name is Andrew Langhorne; I work for the Wall Street Journal.  I am responding in regard to your request to have Stratasys’ EPS and P/E values updated.

I spoke with our data provider, and the data points, EPS and P/E, will update after the next earnings release by the “new” company. 

Since the “new” company did not release a combined earnings statement the previous values for the surviving company will remain.  The Net Income and EPS values will most likely be different from the current values and the company has yet to state what they will be.

The 41 million shares outstanding figure we are showing online, is the new shares outstanding figure for the “new” company.

Please let me know if you have any questions.

Thank you,

Andrew Langhorne

Their full statement is below:

Prior to the merger/acquisition date, the FactSet Fundamentals reflects 

the operations of the surviving entity (Stratasys Ltd.) only as it existed

 prior to the merger; after that date going forward, the data reflects

 the operations of the newly merged entity.  

Therefore, once the new "Company" reports its latest financial data 

the periodic shares outstanding, EPS and other corresponding data

 points will reflect the post-merger information.  

Until this happens, only the "current" shares outstanding 

can be updated to reflect the post-merger data. 

From: Thomas Renna [mailto:thomas.renna@gmail.com]
Sent: Tuesday, January 15, 2013 12:28 PM
To: wsjcontact
Subject: ERRORS
Importance: High

hi,

on your quote page for the ticker SSYS

you adjusted the shares outstanding correctly to 41 million up from 21 million.

but you did not adjust the eps down fro $0.86 to $0.47

and you would then need to change the PE from 99 to 190

Bloomberg page is wrong too in the same way.

meanwhile Morningstar, Yahoo FInance and SSYS's home page still show 21 million shares outstanding and the mkt cap they show is a mere $1.8 billion which should be $3.4 billion the way WSJ has it.

Someone need to fix all this ERRONEOUS DATA and let the world Know

small investors think their buying at a PE of 98 when they're buying at a PE of maybe 190, maybe even higher

the problem is I know the numbers are wrong , they know the numbers are way wrong but the investing public doesn't have a clue and there are no disclaimers anywhere (including at the company SSYS website).

3 D Printer Stock Stratasys is Gonna Get Flattened

CLICK YouTube Video Created on January 14,2013 DDD & SSYS

To See a technical chart by Greg Harmon of DragonFly Capital,  click here:  

Click to Equities Research original post at my home page.  

After Reporting 2011 2nd quarter financials for the period ending June 30,2011, Stockdiagnostics upgraded SSYS from a 2 to 1 ranking (highest ranking) because the company reported it's 4th consecutive positive operational cash flow quarter. Shares have since climbed from $25 to over $80.

<click to SSYS Stockdiagnostics OPS chart  

<click to SSYS Stockdiagnostics OPS chart

<click to SSYS Stockdiagnostics OPS 20 quarter chart

<click to SSYS Stockdiagnostics FCF chart

SSYS reported 2012 3rd quarter financials for the period ending September 30,2012 and the company reported Negative operational cash flow of -($9.6 million) a 262% decline vs. Q3 2011. hence the downgrade.

click image to enlarge:

• ON December 3,2012 Stratasys announced the completed Merger of Objet Inc. 
  
  
  This acquisition brought the number of shares outstanding to 41 million.
  At $83 a share the company today has a market capitalization over $3.4 billion.
  
  
  The problem is if you go to the Company's investor relations page   .
  it states the company only has 21 million shares outstanding and  a $1.8 billion market cap. (40 days have passed since the share number has increased to 41.
  This error also appears at Yahoo Finance and Morningstar. 
  
  
  Motley Fool has published articles analyzing the stock using 21 million shares outstanding and not 41 million shares outstanding.
  
  
  ...and the Yahoo message boards have too many rumors to list about the company possibly being taken over by General Electric or Hewlett Packard.
  
  
  The Annual CES Show  last week added hype to the fire as well. 
  
  
  If these online financial websites have the wrong number of shares outstanding then it begs to ask the following questions:
  
  
  
  
  • I would think that with nearly twice as many shares outstanding that the EPS (Earning Per Share of $0.86 should probably need to be reduced (adjusted lower) or the PE multiple will need to be Ratched up.
  
  
  • Of course Objet numbers (earnings, if there are any) will need to be added to EPS  or subtracted).
  
  
  • The short interest % ratio should probably be looked at as well. if every other data point is adjusted I guess short interest is probably going to be lower %.
  
  
  • The daily volume of shares all of sudden is less in proportion to more shares outstanding as well. In other words, in November 600,000 share average volume was significant with only 21 million shares outstanding.
  
  
  • Today's 399,000 share volume means even less in the big picture with nearly twice as many shares outstanding.
  
  
  • volume this DRY at a top (all time high  (18 yr) was made last week @ $87) is referenced as a CROWDED TRADE.
  
  
  • this could end badly.
  
  
  • I think the Company SSYS is way overdue to Update their Investor Relations Website where they say there are only 21 million shares outstanding.
  
  
  • I know they use Morningstar numbers but that is no excuse for posting an erroneous number.
  
  
  • Its been nearly 40 days and their investor relation page still shows $1.8 billion mkt cap.
  
  
  
  
  Objet was valued at $1,015,633,034 according to merger valuation in SEC filing. Objet owns 45% of new entity and the former SSYS retained 55%. (excluding options and insider positions and miscel.).
   not that important but original SSYS would be $1.2 billion value.
  Now together 40 days later valuation is still over $3 billion
  
   My letter to the WSJ and BloombergAlthough WSJ & Bloomberg have the correct shares outstanding and mkt capitalization correct, neither of them Readjusted the EPS. THE EPS on these two sites needs to be adjusted down taking into account more shares. THe $0.86 EPS they state should be $0.46 and then they would also have to correct their PE multiples from 98 to 190 PE.
  • hi
               on your quote page for the ticker SSYS
  
  
  you adjusted the shares outstanding correctly to 41 million up from 21 million.
  
  
  but you did not adjust the eps down fro $0.86 to $0.47
  
  
  and you would then need to change the PE from 99 to 190
  
  
  Bloomberg page is wrong too in the same way.
  
  
  meanwhile Morningstar, Yahoo FInance and SSYS's home page still show 21 million shares outstanding and the mkt cap they show is a mere $1.8 billion which should be $3.4 billion the way WSJ has it.
  
  
  
  
  Someone need to fix all this ERRONEOUS DATA and let the world Know
  
  
  small investors think their buying at a PE of 98 when they're buying at a PE of maybe 190, maybe even higher
  
  WALL STREET JOURNAL ONLINE responds to my email : click here 
  
  
  Learn About Importance of Operational Cash Flow:
  • Stockdiagnostics Downgrades
  • Cramer & operational cash flow
  • Olstein: Income vs. Cash Flow
  CHANOS ON CASH FLOW @ HPQ (acquisitions to hide weak cash flow)
  
  

 

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<click to EPOC Stockdiagnostics OPS chart
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<click to CBS Stockdiagnostics fcf chart
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<click to MA Stockdiagnostics FCF chart
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<click to MA Stockdiagnostics OPS chart

<click to MA GFNN news story

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<click to MCK Stockdiagnostics OPS chart 5 year

click to MCK Stockdiagnostics OPS chart

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<click to PAA Stockdiagnostics OPS chart 4 quarter
<click to PAA Stockdiagnostics OPS 5 year chart
<click to PAA Stockdiagnostics OPS chart