Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Current Case Study - XRAY
Date: Thu, 8 Aug 2002 21:20:57 -0500
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This is a multi-part message in MIME format. - ------=_NextPart_000_0A81_01C23F21.7CC681D0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Hi Robert, >>Why wouldn't a drop in cash flow from qtr. to qtr. be important, even = cumulatively?<< I want to first be sure we're talking apples and apples. The numbers as = reported on the MSN site are cumulative numbers from one quarter to the = next, so you have to impute the cashflow *per* quarter. See: http://WallStreet-LLC.com/canslim/XRAYCflo.jpg Cash flow from one quarter to the next (say March to June of the same = year) are going to vary according to the activity for that particular = quarter. In the same way that revenues & earnings may have seasonality, = the cashflow will also ebb and flow with business activity. That's why = you really want to look at cashflow over the entire fiscal year vs. the = previous year, or quarter over quarter (e.g., March 01 vs. March 02). >>on the surface increased inventories and receivables would not seem a = good thing, but they did not seem to outpace earnings or revenue growth, = so that seems OK. Agree?<< Absolutely. Increasing inventories could mean sluggish sales, = overproduction, poor inventory management practices, and more. Rising = receivables could mean they may be managing cash poorly, their customers = are having trouble paying, and more. I could go on and on, but I'll just = leave it by saying that this is definitely not a good thing and you'd = want to dig in and find out what is happening in the business that may = be causing it. For example, it may turn out to be the result of an = acquisition in which they have inherited some sludge. Excellent = execution after acquisition would clear this out. You can't find out the = details any other way than to skim the SEC filings and/or Annual = Reports. >>So, looking at this 12.4 million in operating cash flow, am I = comparing it to the trailing 12 months earnings of 120.2 million or am I = misunderstanding how you do this?<< Again, be careful you're comparing apples to apples. The 12.4 million is = total Q1 cashflow (3 months). The 120.4 million is *12* months total = earnings for the prior fiscal year. Best thing to do at any rate is to = look at cash flow *per share* and compare cash flow and earnings per = share for the same fiscal year. You can see cashflow and eps numbers for = the recent year on the DGO charts. However, with some things, I find the = old standard resources are the best. I still like to view an S&P report, = as it shows per share numbers one year to the next over a long period of = time. Most brokerages give you access to this or something similar at no = charge. See it at: http://WallStreet-LLC.com/canslim/XRAYCfloPerShare.jpg Katherine - ----- Original Message -----=20 From: RWElmer@aol.com=20 To: canslim@lists.xmission.com=20 Sent: Thursday, August 08, 2002 8:03 PM Subject: Re: [CANSLIM] Current Case Study - XRAY Hello Katherine,=20 Thanks for responding to this. Opportunity here to fill in some huge = gaps in my education. Why wouldn't a drop in cash flow from qtr. to qtr. = be important, even cumulatively? It would seem to me that you'd want to = see a steady progression. If you have a reference that discusses this = issue, I'd love to read it as this is an area I'm just starting to pay = attention to. In the meantime ... on the surface increased inventories = and receivables would not seem a good thing, but they did not seem to = outpace earnings or revenue growth, so that seems OK. Agree?=20 On a related issue, and I've been wanting to ask you this for a while, = I have seen you say that one should look for cash flow to approximate = earnings, to minimize the possibility that earnings are being = manufactured through creative accounting. So, looking at this 12.4 = million in operating cash flow, am I comparing it to the trailing 12 = months earnings of 120.2 million or am I misunderstanding how you do = this? I use MSN for a good deal of my DD, so it'd be helpful to me to = use the numbers there for our discussion. I was not thrilled with their = Help menu, however, and am therefore hoping you have some better sources = of info that speak to the issues raised. =20 I appreciate your time.=20 Best Wishes,=20 Robert W. Elmer=20 - ------=_NextPart_000_0A81_01C23F21.7CC681D0 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable <!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <HTML><HEAD> <META http-equiv=3DContent-Type content=3D"text/html; = charset=3Diso-8859-1"> <META content=3D"MSHTML 6.00.2716.2200" name=3DGENERATOR> <STYLE></STYLE> </HEAD> <BODY bgColor=3D#ffffff> <DIV>Hi Robert,</DIV> <DIV> </DIV> <DIV>>><FONT face=3DArial size=3D2>Why wouldn't a drop in cash = flow from qtr.=20 to qtr. be important, even cumulatively?<<</FONT></DIV> <DIV> </DIV> <DIV>I want to first be sure we're talking apples and apples. The = numbers as=20 reported on the MSN site are cumulative numbers from one quarter to the = next, so=20 you have to impute the cashflow *per* quarter.</DIV> <DIV> </DIV> <DIV>See: <A=20 href=3D"http://WallStreet-LLC.com/canslim/XRAYCflo.jpg">http://WallStreet= - -LLC.com/canslim/XRAYCflo.jpg</A></DIV> <DIV> </DIV> <DIV>Cash flow from one quarter to the next (say March to June of the = same year)=20 are going to vary according to the activity for that particular quarter. = In the=20 same way that revenues & earnings may have seasonality, the cashflow = will=20 also ebb and flow with business activity. That's why you really want to = look at=20 cashflow over the entire fiscal year vs. the previous year, or quarter = over=20 quarter (e.g., March 01 vs. March 02).</DIV> <DIV> </DIV> <DIV>>>on the surface increased inventories and receivables would = not seem=20 a good thing, but they did not seem to outpace earnings or revenue = growth, so=20 that seems OK. Agree?<<</DIV> <DIV> </DIV> <DIV>Absolutely. Increasing inventories could mean sluggish sales,=20 overproduction, poor inventory management practices, and more. Rising=20 receivables could mean they may be managing cash poorly, their customers = are=20 having trouble paying, and more. I could go on and on, but I'll just = leave it by=20 saying that this is definitely not a good thing and you'd want to dig in = and=20 find out what is happening in the business that may be causing it. For = example,=20 it may turn out to be the result of an acquisition in which they have = inherited=20 some sludge. Excellent execution after acquisition would clear this out. = You=20 can't find out the details any other way than to skim the SEC filings = and/or=20 Annual Reports.</DIV> <DIV> </DIV> <DIV>>>So, looking at this 12.4 million in operating cash flow, am = I=20 comparing it to the trailing 12 months earnings of 120.2 million or am I = misunderstanding how you do this?<<</DIV> <DIV> </DIV> <DIV>Again, be careful you're comparing apples to apples. The 12.4 = million is=20 total Q1 cashflow (3 months). The 120.4 million is *12* months total = earnings=20 for the prior fiscal year. Best thing to do at any rate is to = look at=20 cash flow *per share* and compare cash flow and earnings per = share for=20 the same fiscal year. You can see cashflow and eps numbers for the = recent year=20 on the DGO charts. However, with some things, I find the old standard = resources=20 are the best. I still like to view an S&P report, as it shows = per share=20 numbers one year to the next over a long period of time. Most brokerages = give=20 you access to this or something similar at no charge.</DIV> <DIV> </DIV> <DIV>See it at: <A=20 href=3D"http://WallStreet-LLC.com/canslim/XRAYCfloPerShare.jpg">http://Wa= llStreet-LLC.com/canslim/XRAYCfloPerShare.jpg</A></DIV> <DIV> </DIV> <DIV>Katherine</DIV> <DIV>----- Original Message ----- </DIV> <BLOCKQUOTE=20 style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; = BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px"> <DIV=20 style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: = black"><B>From:</B>=20 <A title=3DRWElmer@aol.com = href=3D"mailto:RWElmer@aol.com">RWElmer@aol.com</A>=20 </DIV> <DIV style=3D"FONT: 10pt arial"><B>To:</B> <A = title=3Dcanslim@lists.xmission.com=20 = href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>= </DIV> <DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Thursday, August 08, 2002 = 8:03=20 PM</DIV> <DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Current = Case Study=20 - XRAY</DIV> <DIV><BR></DIV><FONT face=3Darial,helvetica><FONT size=3D2>Hello = Katherine,=20 <BR><BR>Thanks for responding to this. Opportunity here to fill in = some huge=20 gaps in my education. Why wouldn't a drop in cash flow from qtr. to = qtr. be=20 important, even cumulatively? It would seem to me that you'd want to = see a=20 steady progression. If you have a reference that discusses this issue, = I'd=20 love to read it as this is an area I'm just starting to pay attention = to. In=20 the meantime ... on the surface increased inventories and receivables = would=20 not seem a good thing, but they did not seem to outpace earnings or = revenue=20 growth, so that seems OK. Agree? <BR><BR>On a related issue, and I've = been=20 wanting to ask you this for a while, I have seen you say that one = should look=20 for cash flow to approximate earnings, to minimize the possibility = that=20 earnings are being manufactured through creative accounting. So, = looking at=20 this 12.4 million in operating cash flow, am I comparing it to the = trailing 12=20 months earnings of 120.2 million or am I misunderstanding how you do = this? I=20 use MSN for a good deal of my DD, so it'd be helpful to me to use the = numbers=20 there for our discussion. I was not thrilled with their Help menu, = however,=20 and am therefore hoping you have some better sources of info that = speak to the=20 issues raised. <BR><BR>I appreciate your time. <BR><BR>Best = Wishes,=20 <BR><BR><B>Robert W. Elmer = <BR></BLOCKQUOTE></B></FONT></FONT></BODY></HTML> - ------=_NextPart_000_0A81_01C23F21.7CC681D0-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
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