Chungst

Investools: Too Many Accounting Red Flags

10Q Detective is committing the same mistake as the last critic (Paul Simenauer who, by his own admission, stated he was "dead wrong on SWIM"). Please advise the readers as to the intrinsic value of SWIM so we can discern how overvalued SWIM is. Mr. Simenauer had numerous opportunities to provide his intrinsic value analysis, and to date, he has failed to supply it. I hope 10Q Detective's response is better.

Second, how does 10Q Detective reconcile the positive cash free cash flow per FASB #95 based on the latest form 10-Q filing. I've stated before: "Cash flow from operations revealed $30.3MM in positive cash flow and investing activities consumed about $14.6MM for "capex-related activities" for a positive "free cash flow" of under $16MM for the nine-month period ended 9/30/07." Clearingly, if SWIM is engaging in "accounting gamesmanship" as hinted by 10Q Detective, how is SWIM generating positive free cash flow.

Third, and this is related to points #1 and #2, is comparing the SWIM model to either the Gillette model or HP model (i.e. lose on razor but make it up on the razor blades or lose on printers but make it up on ink, respectively). That is to say, the fundamentals at Investools itself is less of a concern than the profit engine and synergistic relationship when combined with thinkorswim. Or, I don't disagree with 10Q Detective views on Investools so long as the combined SWIM franchise makes money after the dust settles and the franchise is sound.

Lastly, 10Q Detective stated: "In fact, the premium fundamental and technical analytical software available at Investools can be had for FREE at a plethora of websites, from Morningstar to MSN Money's Stock Research Wizard." This statement wrong (and needs a retraction) -- for example, Investools clients have access to the Prophet software (please note I am a fundamental analyst by training), and I don't recall seeing Prophet's software at any of the sites mentioned by 10Q Detective.

Cheers.