Continuation from Friday…..
FUNDAMENTAL ANALYSIS:
In order to establish a clear picture of what had happened between 1999 and today we must first analyze the fundamental growth of the company over the last 15 years.
| Key Statistics | 2000 | 2014 |
| Price Per Share | $1 | $77.70 |
| Market Cap | $39 Million | $3 Billion |
| Earnings Per Share | $(1.47) | $3.17 |
| P/E Ratio | N/A | 24 |
| Price/Sales Ratio | 0.08 | 2.04 |
| Price/Book Ratio | N/A | 10.3 |
| Revenue | $478 Million | $ 1.14 Billion |
| Net Income | $(15 Million) | $124 Million |
| Annual Earnings Growth | 4% (revenue) | 39% |
| Total Cash | $34 Million | $90 Million |
| Total Debt | $ 354 Million | $580 Million |
| Book Value Per Share | $N/A | $5.81 |
| Shares Outstanding | 39 Million | 39 Million |
| Total Assets | $351 Million | $1 Billion |
| Shareholder Equity | $(51 Million) | $120 Million |
As we look at the data above, one issue becomes immediately apparent. Just how much out of shape the company was back in 2000. And not just in 2000, between 1996 and 2000 the company lost a net total of $170 Million. A massive loss considering the company had a debt load of $354 Million, negative equity and a market capitalization of just $39 Million. In other words, at least from the financial statements perspective alone, the company was dying.
Further, while Bally’s financial performance had improved considerably between 2000 and 2014, this improved performance hardly justifies the 7,800% rise in its stock price. With the revenue base growing at just 138% over a 14 year period of time and with the shareholders equity expanding by just $170 Million, it becomes puzzling how Bally’s market capitalization could have expanded from $39 Million to $3 Billion. Finally, while the company was selling at depressed valuation levels throughout 1999 and 2000, with a Price/Sales ratio of 0.08, it not entirely evident if this simple turnaround is what had caused the company’s stock price to expand by 78 bags
We must now go back into the 1995-2000 period and study the company in greater detail in order to determine why the company was underperforming, losing money and on a verge of a financial collapse during that time. Further, we must ascertain what the company did between 2000 and today in order to turn things around. If this improved performance could have been anticipated. Most importantly, we have to figure out if we would have been smart enough to take a long position in either 1999 or 2000.
To Be Continued Tomorrow…..
