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Ranjit Thomas

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  • Imax Has a Collapse in Its Future [View article]
    One point to note is that IMAX is a company that has cumulatively not generated any cash in the last 3 years, has issued equity in the secondary market and liberally awarded stock to its management. In the last twelve months, if you back out the stock comp add-back, free cash flow is close to zero. So the bulls who are buying the stock at 30x EPS based on abstract conceptual arguments should ask themselves why the company is incapable of generating any cash even when things are going swimmingly well.
    Jun 9 10:11 AM | 1 Like Like |Link to Comment
  • Ariba: A Dot Com Survivor Primed for a Fall [View article]
    As mentioned in the article, the stock was around 28 when the article was published and is currently at 31.4, an increase of 12% vs. the market up 5% in the same timeframe. One of the things to keep in mind when writing or reading a short idea is that a stock can remain overvalued for a very long time. Unlike measures that a company can take to correct an undervaluation of its stock (like buying back stock with its free cash flow), there is no impetus for a stock trending down to its fair value in a rising market unless there is something like outright fraud that gets exposed. It's only when the economy is about to enter into a recession that investors get more discriminating about their stock picks. Until then, they chase everything that looks like a good story, fundamentals be damned. This is especially true in today's easy money environment, where there are near worthless companies (when evaluated on their current and future profit potential) in "hot" sectors trading at multi-billion dollar valuations. I certainly wouldn't recommend that a regular retail investor short stocks; it should only be used to hedge a large long portfolio.
    Apr 26 10:25 AM | Likes Like |Link to Comment
  • Ultimate Software and the Art of Non-GAAP Earnings [View article]
    A good article. You are completely right in your analysis. It's incredible that near worthless companies like ULTI have > $1Bn of market cap. Some others that have suckered investors into ignoring their huge stock comp are ARUN, ARBA, SFSF and N.
    Mar 29 09:53 AM | 3 Likes Like |Link to Comment
  • What is Amazon's True Free Cash Flow? [View article]
    Good question. The item enters as a benefit to taxes payable in the working capital section.
    Feb 13 06:23 PM | Likes Like |Link to Comment
  • What is Amazon's True Free Cash Flow? [View article]
    You are right that the entire $577Mn for capital leases is not paid out right now, but will be over time. Including interest, the actual payments will be higher than this amount. So one can either use this amount (equivalent to assuming they are acquiring the assets with a loan that will be gradually repaid), or use the actual cash outflow (including interest) on account of capital leases. The latter figure is not disclosed explicitly by Amazon (or most companies) and is difficult to discern. On your second point, I do not agree that you need to add back the excess tax benefit amount. This is the amount by which tax paid by the company has been reduced and is already accounted for in the cash flow from operations in the form of lower tax payments.
    Jan 29 08:41 AM | 1 Like Like |Link to Comment
  • Update on Netflix and Akamai Story With Comments From Both Companies [View article]
    Well written piece. Perhaps you can expand on what services Akamai will still provide Netflix if streaming is not one of them? I imagine it's something like caching, but that would be a small bit of business.
    Nov 10 08:12 AM | Likes Like |Link to Comment
  • GeoEye: Insiders Prep for Mega-Growth [View article]
    All very good, except for the fact that the company has never generated any cash. All the cash that comes in has to go out to replace aging satellites, which have a life of about 10 years and cost $500Mn to build and launch. A buyout seems unlikely as a buyer will find it hard to put on any more debt on the company. Incidentally, the company just issued debt at a high 9% yield, which tells you something about what the debt markets think of its prospects. There are few barriers to entry in this business (other than capital which is plentiful), and a 3x price to book value seems grossly overvalued. Every few years, investors get excited about a satellite business that subsequently crashes and burns (Iridium, Sirius, etc.)
    Oct 18 08:35 AM | Likes Like |Link to Comment
  • Just One Stock: A Trade-Oriented Educator Booking Organic Growth [View article]
    David,

    What you see as insider sales of 3 million shares in the last 6 months is the sale by Stonington Partners (a private equity firm) in a secondary offering in April. They have been gradually reducing their stake, which is now down to about 10%.
    Jul 13 04:09 PM | 2 Likes Like |Link to Comment
  • High Conviction: This Hard Drive Maker Will Outshine the Competition [View article]
    Have you had a conversation with management on their capital allocation strategy? Why do they continue to stockpile cash without returning any of it to shareholders through a dividend or buyback?
    Jun 9 09:03 AM | Likes Like |Link to Comment
  • High Conviction: An Underappreciated Software Stock [View article]
    The problem with NUAN is that it appears cheap only because the company pays its employees heavily with stock/options and conveniently pro-forma's out the expense. The GAAP earnings are considerably lower than the analyst estimates. The higher the stock goes, the more stock management sells, and the higher the number of outstanding shares. That said, it is in a good business and the shares do not look overvalued, but any market weakness would result in the shares taking a big hit as buyers disappear but sellers (management) don't.
    Apr 12 08:52 PM | 5 Likes Like |Link to Comment
  • DynCorp: Undervalued Defense Stock with Substantial Upside [View article]
    I am recommending a closing of this trade today. DCP received an offer to be taken private by Cerberus for $17.55 per share, and the stock closed at $17.41 for a 55% gain in the 2.5 months since this piece was published vs. a 9% rise in the S&P 500.
    Apr 12 08:45 PM | Likes Like |Link to Comment
  • Cavium Networks: Poised to Break Out? [View article]
    Good luck chasing a stock with the following characteristics:
    Zero earnings currently. 60x forward proforma EPS, excluding stock comp. Negative free cash flow. 9x revenues.

    That's CAVM for you. Fair value for the stock is somewhere in the single digits. There's always a nice story to spin around how great their future products will be, even if profits are always elusive.
    Dec 18 04:37 PM | 1 Like Like |Link to Comment
  • Linn Energy: High Dividend, Low Valuation [View article]
    The problem with LINE is that like a lot of other exploration companies, they generate no cash, pumping huge amounts into capex. The high dividend yield is illusory because it is funded by regular equity issuances - no different from a Ponzi scheme. Also, they were smart/lucky enough to hedge most of this year's production at high prices. As these hedges come off, they will be in deep trouble.
    Aug 14 07:05 AM | 7 Likes Like |Link to Comment
  • Lampert Sells More AutoZone Shares: What Happens Now? [View article]
    Don't see anything wrong in Lampert selling to lighten his substantial stake. AZO doesn't look overvalued at 13x EPS and FCF, and management should be lauded for actively returning cash to shareholders. Compare it to ORLY, for instance, that is trading at 20x EPS, where trailing FCF is negative (calling into question their earnings quality), and management is busy dumping their stock.
    Jul 19 06:01 PM | Likes Like |Link to Comment
  • AutoZone: The End of a Bear Market Bulwark? [View article]
    Maybe your analysis can be improved by looking at AZO's PE and FCF multiple? I believe these are still pretty reasonable, especially compared to a competitor like ORLY.
    Jun 10 08:39 AM | Likes Like |Link to Comment
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