Thursday, January 17, 2013
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.