I believe that shares of Skullcandy (NASDAQ:SKUL), a former high flying personal audio equipment designer, are worth examining in light of the fairly protracted share price decline from its IPO. The mission here is simple: was the most recent earnings report the catalyst for a capitulation bottom with a significant opportunity on the long side to ride the recovery, or is the business in fundamental decline?
What Is Wrong?
While metrics such as EPS can be manipulated to some degree, there is only one metric that gives an accurate metric of corporate health: free cash flow. Unfortunately, since IPO, Skullcandy's FCF has been on a downward spiral:
SKUL Free Cash Flow TTM data by YCharts
While revenue has...
|FREE||SA PRO MEMBERS|
|IDEA GENERATOR||X||Exclusive access to 10 PRO ideas every day|
|INVESTING IDEAS LIBRARY||X||Exclusive access to PRO library of more than 15,000 ideas|
|SECTOR EXPERT NETWORK||X||Exclusive access to all sector experts for direct consultation|
|PERFORMANCE TRACKING||X||Track performance of all PRO stock ideas|
|PROFESSIONAL TOOLS||X||Professional Idea Filters to zero-in based on industry, market cap and more|