Aaron Brask

CNET's Traffic Collapse and TheStreet.com

There was an article somewhere on here I came across when looking for more information. It was written by the 10Q Detective. [related digression: it is funny how most analysts are happy not to delve into 10Qs]

To me (and I am NOT an equity analyst so take w grain of salt) LTM is simply a case of Wall Street's attraction to a company with growing earnings no matter how/where the earnings came about/from. It loos like this earnings growth was through expansion by in an unprofitable manner. I would think that if a gym (or chain of them) was succesful, it would generate good free cash flow. And I thought if you bought a (good) gym, it would have been making money. But the have managed to burn cash EVERY quarter for a few years now. But earnings are growing? And now their cash situation does not look healthy at all.

CNET's Traffic Collapse and TheStreet.com

I agree with your view of the macro picture for this stock (competition and minimal barrier to entry) but I think you left out a couple of details:
- Accounts receivable is now about 30% of their earnings and has risen over last few years. Not condemning but not pretty.
- CEO dumped about 37,000 shares earlier this year around $12 (from exercised options) ... sorry, without a position to motivate me, I am too lazy to dig through to see how much he had in total
- Return on equity/assets is VERY low

But it also has no debt and it is never a good idea to underestimate the potential of bankers to find people to inject new funds to finance unwarranted expansion... Indeed, looking at earnings and FCF growth, investors could easily get sucked in.

Just my 2 cents...I think LTM is better short.