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  • Probability Of 2014 Bankruptcy For Titan Increases After It Files Quarterly Report

    Stockdiagnostics' chief market strategist, Michael Markowski, published the following report Knobias this morning @ 9:56am.

    Probability of 2014 Bankruptcy for Titan Increases After it Files Quarterly Report

    By Michael Markowski

    The probability of Titan Machinery (NASDAQ:TITN:$15.00) having to file for bankruptcy by the end of or sooner than the end of 2014 has increased significantly based on its 3rd quarter 10/31/13 financials that it filed yesterday. In a report Tractor Pull for Titan Machinery May be Over by Tomorrow which was published on December 4, 2013, I had predicted that Titan would file for bankruptcy by the end of 2014.

    Titan's Income Statement, Balance Sheet and Cash Flow Statement data deteriorated over the 90 day period. Titan's revenue for its 3rd quarter increased by less than 1% from $582.1 million in the year ago quarter to $588.0 million. It also reported that its inventory increased by 10% to $1.2 billion from its quarter ended July 31, 2013. Finally, Titan operating cash flow for the quarter was a negative $59.8 million. Titan has generated negative quarterly operating cash flow in nine of its last 10 quarters.

    Titan is following a similar script that I have seen played out by numerous companies that has diagnosed as having "The EPS Syndrome". Notable companies who were previously diagnosed with this negative operating cash flow anomaly include Bear Stearns, Merrill Lynch and Lehman Brothers. Here is the typical script:

    1. Company utilizes archaic SEC accrual accounting standards to report growing cashless earnings.

    2. Wall Street analysts recommend shares based on earnings growth.

    3. Wall Street investment bankers who are affiliated with analysts raise capital for company to generate commissions.

    4. Commercial banks and suppliers provide loans and credit lines based on the increased equity.

    5. After the company maximizes its ability to raise additional debt and equity capital revenue growth flattens.

    6. Company sells inventory at losses and creates declining revenue and EPS losses.

    7. Company loses option to sell or issue equity to raise capital due to both fundamentals and share price momentum turning negative. Also loses ability to increase borrowings.

    8. Company's fundamentals and share price continue in downward spiral as it liquidates inventory at declining prices to raise cash.

    9. Company has no choice but to file for bankruptcy since it has debt and can not raise cash.

    Titan was first diagnosed as having The EPS Syndrome on September 8, 2011 at a price of $26.41. Its among several institutionally held public companies who have Wall Street analyst Buy Ratings that has diagnosed with extreme or severe cases of The EPS Syndrome or cashless earnings.

    There have been 93 companies diagnosed with The EPS Syndrome during 2013 and more than 2,500 since 2002. The share prices of approximately 70% of the companies diagnosed are below their diagnosis price. Share prices have fallen by at least 50% for half of those companies that have been diagnosed as having the EPS Syndrome. A four minute video that explains The EPS Syndrome is available.

    Dec 06 1:37 PM | Link | 2 Comments
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